Note additional information: Machine Hours and Labour Hours
| Cutting | Finishing | Admin | Canteen | Total | |
|---|---|---|---|---|---|
| Indirect Material | 4,500 | 3,500 | 4,000 | 6,000 | 10,000 |
| Indirect Labour | 35,000 | 20,000 | 7,500 | 5,000 | 62,500 |
| Value of Machinery | 35,000 | 20,000 | 5,000 | 2,500 | 62,500 |
| No of Employees | 18 | 52 | 20 | 10 | 100 |
| Floor Area (sq m) | 2,400 | 3,000 | 2,600 | 2,000 | 10,000 |
| Machine Hours | 36,000 | 34,000 | 24,000 | 6,000 | 100,000 |
| Labour Hours | 50,000 | 24,000 | 36,000 | 10,000 | 120,000 |
Calculate the overhead absorption rate applied to:
Cutting
£36,143 ÷ 50,000
= £0.72 per labour hour
(Total cutting figure taken from Overhead Analysis ÷ Cutting labour hours)
Finishing
£47,757 ÷ 34,000
= £1.40 per machine hour
(Total finishing figure taken from Overhead Analysis ÷ Finishing machine hours)
Calculate the increase or decrease in the overheads applied to Job 70 by using the new departmental overhead rates.
Machine hours required to complete Job 70 are as follows:
Factory Overhead (taken from Job costing statement): £20,000
| Cutting | Finishing | Total | |
|---|---|---|---|
| Overhead applied (new rates) | 10,000 × £0.72 = £7,200 | 24,000 × £1.40 = £33,600 | £40,800 |
| Factory Overhead | £20,000 | ||
| Increase | £20,800 |
