What will be the selling price each to make a profit

Reference no: EM132500417 , Length: 1 Page

Assignment - Cost Accounting Question

Alberto Company Ltd has two production departments, Finishing and Assembly, and two service departments, Maintenance and Quality Control. The following information is available about overhead costs.

	Total GH¢	Finishing GH¢	Assembly GH¢	Maintenance GH¢	Quality Contort GH¢
Indirect labour cost	14,500	4,300	5,000	3,500	2,000
Indirect materials	4,600	1,300	2,100	800	400
Building rental	14,000
Building Insurance	1,500
Depreciation	12,000
Equipment insurance	3,400
	50,000

Note:

Depreciation is a charge for the use of items of plant and equipment such as machinery.

Indirect labour and indirect material costs have been allocated directly to these four cost centres. The other overhead costs are shared between the cost centres and so cannot be allocated directly.

Other Information -

	Total	Finishing	Assembly	Maintenance	Quality Control
Cost of plant/equipment (GH¢)	70,000	40,000	15,000	5,000	10,000
Floor area (square metres)	1,800	500	900	100	300
Kilowatt hours (000s)	800	600	100	50	50
Direct Labour hours	3,500	2,000	1,500

The Service Departments provide services to all other departments of the company as below.

	Maintenance	Quality Control
Finishing	40%	45%
Assembly	35%	30%
Maintenance	-	25%
Quality Control	25%	-

Overheads are absorbed on a direct labour hour basis for each production cost separately.

Required -

a. Use the simultaneous equations method to calculate the total overhead costs apportioned to each production cost centre.

b. Establish the absorption rate for each production cost centre.

c. Two products were produced for a customer, Product A and Product B. Direct material costs are GH¢1,500 and GH¢800 respectively. Direct labour costs were GH¢850 and GH¢700 respectively. The two departments spent direct labour hours on the job as follows: Product A: 7hrs and 5hrs respectively; Product B: 5hrs and 8hrs respectively. Calculate the full cost for each of the Products.

d. What will be the selling price each to make a profit of 40% on cost?

Reference no: EM132500417

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