The following information is provided for FairDeal furniture ltd.The information will be used to determine the total cost incurred for Job-FD800 which entailed production of sofa sets.The company has one production department where all the furniture is produced. 1. The following budget figures are provided for the production department for the year 2021. Budget Production overhead cost Shs 40,000,000 Budgeted Direct labour hours 2,500 hours Note: The company allocated Factory overheads to customer jobs using the Budgeted Direct labour hours as the absorption base. 2. The cost details for Job-FD800 are as given below; 1.Cost of Materials used in the Job 3.The company hired a special machine for stitching the material used in the sofa at a cost of: 4.The Direct Labour hours used to complete the job 5.The company adds a profit margin of 25% to the total cost of the job to determine the Selling price of the job. 250,000 35,000 400 Direct Labour hours Profit Margin (10%) 2.Direct labour hours used to complete the job (400 Hrs). The company pays Shs 1,200 For every direct labour hour used in the job 400 Direct Labour hours Required: i) Calculate the overhead absorption rate per direct labour hour for the company using machine hours as the absorption base. ii) Prepare the job cost sheet for Job-FD800 using the above information. The job cost sheet should provide the total cost for the job and the selling price.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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The following information is provided for FairDeal furniture ltd.The information will be used to determine the total cost incurred for Job-FD800 which entailed production of sofa sets.The company has one production department where all the furniture is produced.
1. The following budget figures are provided for the production department for the year 2021.
Budget Production overhead cost Shs 40,000,000 Budgeted Direct labour hours 2,500 hours
Note: The company allocated Factory
Direct labour hours as the absorption base.
2. The cost details for Job-FD800 are as given below;
1.Cost of Materials used in the Job
3.The company hired a special machine for stitching the material used in the sofa at a cost of:
4.The Direct Labour hours used to complete the job
5.The company adds a profit margin of 25% to the total cost of the job to determine the Selling price of the job.
250,000
35,000
400 Direct Labour hours Profit Margin (10%)
|
2.Direct labour hours used to complete the job (400 Hrs). The company pays Shs 1,200 For every direct labour hour used in the job |
400 Direct Labour hours |
Required:
i) Calculate the overhead absorption rate per direct labour hour for the company using machine hours as the absorption base.
ii) Prepare the
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