S2/2003 Ltd produces two products, DA and DB in batches on the same production line. DA...

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S2/2003 Ltd produces two products, DA and DB in batches on the same production line. DA and DB are both machine oriented in their production process. Details for one unit of each product are: Direct Materials Direct Labour at $4.00 per hour Machine time DA $8 $12 6 hours (i) (ii) (iii) ᎠᏴ $10 $20 5 hours 2,000 units Budgeted production for the year 5,000 units Total budgeted production overheads for the year are: $120,000. Selling prices are based on the estimated total factory cost plus 15%. Required: a) Calculate a predetermined absorption rate for production overhead based upon: Direct material cost (percentage of cost); Direct labour hours (rate per hour); Machine hours (rate per hour). (3 marks) b) Calculate 3 separate selling prices for product DA only, using each of the absorption rates calculated in part a) above. (1 marks) c) State which of the absorption rates calculated in part a) is the most appropriate to reflect the selling prices of the product. (1 marks) S2/2003 Ltd produces two products, DA and DB in batches on the same production line. DA and DB are both machine oriented in their production process. Details for one unit of each product are: Direct Materials Direct Labour at $4.00 per hour Machine time DA $8 $12 6 hours (i) (ii) (iii) ᎠᏴ $10 $20 5 hours 2,000 units Budgeted production for the year 5,000 units Total budgeted production overheads for the year are: $120,000. Selling prices are based on the estimated total factory cost plus 15%. Required: a) Calculate a predetermined absorption rate for production overhead based upon: Direct material cost (percentage of cost); Direct labour hours (rate per hour); Machine hours (rate per hour). (3 marks) b) Calculate 3 separate selling prices for product DA only, using each of the absorption rates calculated in part a) above. (1 marks) c) State which of the absorption rates calculated in part a) is the most appropriate to reflect the selling prices of the product. (1 marks)

Answer rating: 100% (QA)

a To calculate the predetermined absorption rate for production overhead we need to divide the total budgeted production overheads by the relevant cos... View the full answer