A premier recipe of the Swahili Dishes Restaurant, Thubu, is made through two production departments, mixing and
Question:
A premier recipe of the Swahili Dishes Restaurant, Thubu, is made through two production departments, mixing and production and one service department, services.
A cost sheet obtained from the clerk shows the following;
$
Indirect materials 2,200
Indirect labour 8,300
Power 900
Maintenance 1,600
Insurance 1,000
Depreciation 3,400
Staff canteen 3,500
Supervision 2,540
Rent and rates 4,300
An analysis of the cost sheet further revealed the costs incurred in producing Thubu through the three departments as follows;
Department
Mixing Production Services Total
Direct materials 10,000 14,200 11,012 35,212
Direct labour 1,500 2,180 3,650 7,330
Direct expenses 2,500 4,000 3,000 9,500
The following details are available for each of the departments;
Department
Mixing Production Services Total
Area(M2) 10 12 24 46
Indirect materials 1100 1300 400 2800
Number of employees 35 28 45 108
Kilo watt Hours 15 10 30 55
Machine Book value ($000) 24 48 32 104
Direct labour hours (000) 12 15 10 42
Direct material cost ($000) 34 45 22 101
Overheads are absorbed on the basis of direct material cost percentage in the mixing and production departments.
Services department overheads should be reapportioned to the production departments in the ratio of direct labour hours for mixing and production dept respectively.
Required
Using the absorption costing method, determine the selling price of Thubu assuming a 25% mark-up.
Financial and Managerial Accounting
ISBN: 978-1285866307
13th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac