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.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Solution Overheads costs cannot be attributed to a particular product unit or section of ... View the full answer