Question 2 [100 marks] In Jasmine Ltd’s production cost centre, two units are produced: Unit Aand Unit...

70.2K

Verified Solution

Question

Accounting

Question 2 [100 marks]
In Jasmine Ltd’s production cost centre, two units are produced:Unit Aand Unit B, the total overhead cost being €1000. This is madeup of two costs:
Machine set-up costs of €800; and
Inspection costs of €200.
Overhead is absorbed on the basis of direct labour hours. Thetotal direct labour hours (DLH) amount to 200 DLH.
Unit A requires 150 DLH; and
Unit B 50 DLH.
The machinery for Unit A only needs to be set-up once whereasUnit Brequires nine set-ups. Unit A and Unit B both require twoinspections each.
Required
a) Calculate the overhead recovery charge that should be made toeach product, based on:
Absorption costing method based on Direct Labour Hours.
[20 marks]
The ABC method based on machine set-up costs and inspectioncosts.
[50 marks]
b) Show the comparison of each method and write a short noteexplaining
why the difference occurs.
[30 marks]

Answer & Explanation Solved by verified expert

4.3 Ratings (930 Votes)

Hey champ heres your answer 1 Overhead recovery charge that should be made to each product based on Absorption costing method based on Direct Labour Hours The total overhead cost 1 Machine setup cost 800 2 Inspection cost 200 Total overhead cost 1000 Total direct labour hours 200 DLH Thus Overhead absorption rate is 1000 200 DLH 5 per DLH Weve got absorption See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member