Budgeted information relating to two departments in A Co for the next period is as follows. Production Direct material overhead cost $ Department 1 2 $ 67,500 36,000 Direct labour cost $ 13,500 100,000 Direct labour hours Machine hours What is the most appropriate production overhead absorption rate for department 1? 40% of direct material cost 200% of direct labour cost $10 per direct labour hour $0.60 per machine hour 27,000 2,700 18,000 25,000 Individual direct labour employees within each department earn differing rates of pay, according to their skills, grade and experience. 45,000 300

Budgeted information relating to two departments in A Co for the next period is as follows. Production Direct material overhead cost $ Department 1 2 $ 67,500 36,000 Direct labour cost $ 13,500 100,000 Direct labour hours Machine hours What is the most appropriate production overhead absorption rate for department 1? 40% of direct material cost 200% of direct labour cost $10 per direct labour hour $0.60 per machine hour 27,000 2,700 18,000 25,000 Individual direct labour employees within each department earn differing rates of pay, according to their skills, grade and experience. 45,000 300

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 1BE: At the beginning of the period, the Fabricating Department budgeted direct labor of 72,000 and...

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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

Budgeted information relating to two departments in A Co for the next period is as follows.
Direct labour
Production
overhead
hours
Department
1
2
Direct material
cost
$
200% of direct labour cost
$10 per direct labour hour
$0.60 per machine hour
$
27,000
2,700
18,000
25,000
Individual direct labour employees within each department earn differing rates of pay, according to their
skills, grade and experience.
What is the most appropriate production overhead absorption rate for department 1?
40% of direct material cost
Direct labour
cost
$
67,500
36,000
Machine hours
13,500
100,000
45,000
300

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