The Warren company manufactures three products at its Leicester factory. Karen, the managing director, is concerned...

 


  

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The Warren company manufactures three products at its Leicester factory. Karen, the managing director, is concerned that the way the products are costed is misleading as to whether or not they are profitable. As the products are independent there is an option to cease the product of a product if it is beneficial to the company. The cost information is shown below: Product Daisy Product Graham Product Billy Hours per unit Assembly 1 3 2 Machine 2 1 1 Material per unit 120 95 55 Unit Volume 780 1,250 9,000 Direct labour hour cost is 17.50 per hour and production overheads are absorbed in the assembly department based on labour hours and the machining department based on machine hours, both at pre-determined overhead rates. Budgeted overhead spend in the assembly department for the period was 500,000 and for the machining department was 150,000. Required: a) Calculate the departmental overhead absorption rates using the traditional overhead absorption method. How much overhead will be allocated to product Daisy using this traditional method? The Warren company manufactures three products at its Leicester factory. Karen, the managing director, is concerned that the way the products are costed is misleading as to whether or not they are profitable. As the products are independent there is an option to cease the product of a product if it is beneficial to the company. The cost information is shown below: Product Daisy Product Graham Product Billy Hours per unit Assembly 1 3 2 Machine 2 1 1 Material per unit 120 95 55 Unit Volume 780 1,250 9,000 Direct labour hour cost is 17.50 per hour and production overheads are absorbed in the assembly department based on labour hours and the machining department based on machine hours, both at pre-determined overhead rates. Budgeted overhead spend in the assembly department for the period was 500,000 and for the machining department was 150,000. Required: a) Calculate the departmental overhead absorption rates using the traditional overhead absorption method. How much overhead will be allocated to product Daisy using this traditional method?

Answer rating: 100% (QA)

To calculate the departmental overhead absorption rates using the traditional overhead absorption method you can use the following formulas 1 Assembly Department Overhead Absorption Rate Assembly Over... View the full answer