a furniture making business manufactures quality furniture to customers 39 orders 597726
Overhead analysis and calculation of product costs
A furniture-making business manufactures quality furniture to customers’ orders. It has three production departments and two service departments. Budgeted overhead costs for the coming year are as follows:
|
Total (L) |
|
|
Rent and Rates |
12800 |
|
Machine insurance |
6000 |
|
Telephone charges |
3200 |
|
Depreciation |
18000 |
|
Production Supervisor’s salaries |
24000 |
|
Heating & Lighting |
6400 |
|
70400 |
The three production departments — A, B and C, and the two service departments — X and Y, are housed in the new premises, the details of which, together with other statistics and information, are given below.
|
Departments |
|||||
|
A |
B |
C |
X |
Y |
|
|
Floor area occupied (sq.metres) |
3000 |
1800 |
600 |
600 |
400 |
|
Machine value (£000) |
24 |
10 |
8 |
4 |
2 |
|
Direct labour hrs budgeted |
3200 |
1800 |
1000 |
||
|
Labour rates per hour |
£3.80 |
£3.50 |
£3.40 |
£3.00 |
£3.00 |
|
Allocated Overheads: |
|||||
|
Specific to each department (£000) |
2.8 |
1.7 |
L2 |
0.8 |
0.6 |
|
Service Department X’s costs apportioned |
50% |
25% |
25% |
||
|
Service Department Y’s costs apportioned |
20% |
30% |
50% |
||
Required:
Prepare a statement showing the overhead cost budgeted for each department, showing the basis of apportionment use-a-Al so calculate suitable overhead absorption rates.
Two pieces of furniture are to be manufactured for customers. Direct costs are as follows:
|
Job 123 |
Job 124 |
|
|
Direct Material |
£154 |
£108 |
|
Direct Labour |
20 hours Dept A |
16 hours Dept A |
|
12 hours Dept B |
10 hours Dept B |
|
|
10 hours Dept C |
14 hours Dept C |
Calculate the total costs of each job.
(c) If the firm quotes prices to customers that reflect a required profit of 25% on selling Trice, calculate the quoted selling price for each job.