McKinsey Machines Ltd manufactures a single product A . It has two cost centers namely molding department
Question:
McKinsey Machines Ltd manufactures a single product A. It has two cost centers namely molding department and painting department.
Information | Molding Department | Painting Department |
Total Manufacturing overheads | $ 1,806,000 | $ 2,205,000 |
Total Machine hours (estimated) | 210,000 | |
Total Direct Labour Cost | $ 1,260,000 |
McKinsey Ltd executes job no. 410. The cost and output details of Job No.410 are given below:
Information | Molding Department | Painting Department |
Direct Materials | $ 1,410 | $ 996 |
Direct Labour | $ 870 | $ 2,040 |
Number of machine hours used in job no. 410 | 330 hours | |
Output (units) (expected to be received from Job No. 410) | 150 units |
Overheads allocation to Job No. 410 will be as follows:
(a) Molding department overheads will be allocated based on machine hours
(b) Painting Department overheads will be allocated using direct labour costs (as a percentage).
Required
(1) Calculate overhead absorption rate for Molding Department and Painting Department based on allocation bases given above