QUESTION 1 (26 MARKS)

Tully Cc is a small firm that makes outfits for customers tailored for their functions, in December 2021 she has orders for a Baby Shower (BS) and a Bridal Party (BP).

The details for Job BS are as follows:

Direct materials: 12 units at N$124.

Direct labour: 20 hours for department A at N$25 per hour, 10 hours for department B at N$30 per hour and 12 hours for department C at N$27.5 per hour.

The firm allocates manufacturing overheads budgeted at N$2 500 in department A, N$2 000 in department B and N$3 000 in department C.

The firm expects a profit of 55% on the total cost of BS.

The details for Job (BP) are as follows:

Direct materials: 10 units at N$108.

Direct labour: 16 hours for department A, 10 hours for department B and 14 hours for department C

The labour hours are budgeted at 40, 25 and 30 in departments A, B and C respectively.

The firm expects a profit of 40% on the total cost of BP.

REQUIRED

1.1 Calculate the predetermined overhead allocation rate (OAR) for each department using labour hours as a base for such allocation. (3 marks)

1.2 Calculate the cost of a bridal party (BP). (8 marks)

1.3 Calculate the Selling price of the bridal party (BP). (3 marks)

1.4 Calculate the cost of a baby shower (BS). (8 marks)

1.5 Calculate the Selling price of a baby shower (BS). (3 marks)

1.6 If the number of outfits are the same for each type of function, which function should Tully choose to produce and why? (1 mark) TOTAL MARKS (26 marks)