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12.2 L01/2 PDH Ltd uses a predetermined overhead rate in applying overheads to product costs,...

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Accounting

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12.2 L01/2 PDH Ltd uses a predetermined overhead rate in applying overheads to product costs, using direct abour costs for cost centre A and machine hours for cost centre B. The following details the estimated forecasts for 2015. Direct labour hours Direct labour costs Machine hours Production overheads 18,000 $400,000 2,000 140,000 7,000 $140,000 20,000 $300,000 (a) What is the predetermined overhead rate for cost centres A and B? What would be the overhead rates if we used machine hours for cost centre A and direct labour hours for cost centre B? (c) What is the main limitation of full costing (also known as absorption costing)

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