Overhead analysis and calculation of product costs
A furniture-making business manufactures quality furniture to customers' orders. It has three production departments and two service departments. Budgeted overhead costs for the coming year are as follows:
|
Total (L)
|
|
Rent and Rates
|
12800
|
|
Machine insurance
|
6000
|
|
Telephone charges
|
3200
|
|
Depreciation
|
18000
|
|
Production Supervisor's salaries
|
24000
|
|
Heating & Lighting
|
6400
|
|
70400
|
The three production departments - A, B and C, and the two service departments - X and Y, are housed in the new premises, the details of which, together with other statistics and information, are given below.
|
|
Departments
|
|
|
A
|
B
|
C
|
X
|
Y
|
|
Floor area occupied (sq.metres)
|
3000
|
1800
|
600
|
600
|
400
|
|
Machine value (£000)
|
24
|
10
|
8
|
4
|
2
|
|
Direct labour hrs budgeted
|
3200
|
1800
|
1000
|
|
|
|
Labour rates per hour
|
£3.80
|
£3.50
|
£3.40
|
£3.00
|
£3.00
|
|
Allocated Overheads:
|
|
|
|
|
|
|
Specific to each department (£000)
|
2.8
|
1.7
|
L2
|
0.8
|
0.6
|
|
Service Department X's costs apportioned
|
50%
|
25%
|
25%
|
|
|
|
Service Department Y's costs apportioned
|
20%
|
30%
|
50%
|
|
|
Required:
Prepare a statement showing the overhead cost budgeted for each department, showing the basis of apportionment use-a-Al so calculate suitable overhead absorption rates.
Two pieces of furniture are to be manufactured for customers. Direct costs are as follows:
|
Job 123
|
Job 124
|
|
Direct Material
|
£154
|
£108
|
|
Direct Labour
|
20 hours Dept A
|
16 hours Dept A
|
|
12 hours Dept B
|
10 hours Dept B
|
|
10 hours Dept C
|
14 hours Dept C
|
Calculate the total costs of each job.
(c) If the firm quotes prices to customers that reflect a required profit of 25% on selling Trice, calculate the quoted selling price for each job.