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KENT Ltd produces a range of products. Manufacturing is undertaken using one of two processes: the Alpha and the Omega Processes. All of the products are manufactured in batches The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. A recent detailed analysis has examined overhead cost; the results are: Analysis of overhead costs Cost per month (£) 192,000 89,600 85,800 91,200 Monthly volume Alpha Process cost Omega Process cost Set-up cost Handling charges Other overheads Total overbead costs 960 hours 2,560 hours 520 set-ups 380 movements (see below) 101,400 560,000

KENT Ltd produces a range of products. Manufacturing is undertaken using one of two processes: the Alpha and the Omega Processes. All of the products are manufactured in batches The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. A recent detailed analysis has examined overhead cost; the results are: Analysis of overhead costs Cost per month (£) 192,000 89,600 85,800 91,200 Monthly volume Alpha Process cost Omega Process cost Set-up cost Handling charges Other overheads Total overbead costs 960 hours 2,560 hours 520 set-ups 380 movements (see below) 101,400 560,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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KENT Ltd produces a range of products. Manufacturing is undertaken using one of two processes: the Alpha and the Omega Processes. All of the products are manufactured in batches The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. A recent detailed analysis has examined overhead cost; the results are: Analysis of overhead costs Monthly volume Cost per month (£) 192,000 89,600 85,800 91,200 101,400 560,000 Alpha Process cost Omega Process cost 960 hours 2,560 hours 520 set-ups 380 movements Set-up cost Handling charges Other overheads Total overhead costs There are 2,000 direct labour hours available each month. (see below) Two of KENT's products are a JTI01 and a GR27. JT101S are produced by the Alpha Process in a simple operation. GR275 are manufactured by the Omega Process. Both products are sold by the metre. Details of the two products are: JT101 1,000 metres 1,000 metres GR27 500 metres Monthly volume Batch size Processing time per batch Alpha Omega Set-ups per batch Handling charges per batch Materials per metre Direct labour per metre (Direct cost) Direct labour is paid at £16 per hour. 50 metres 100 hours 25 hours 2 set-ups 5 movements £15 hour 1 set-up 1 movement £16 /½ hour Q. What is the set-up cost per metre for JT101S 42.9 O 0.165 O 1 0 165 O
Transcribed Image Text:KENT Ltd produces a range of products. Manufacturing is undertaken using one of two processes: the Alpha and the Omega Processes. All of the products are manufactured in batches The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. A recent detailed analysis has examined overhead cost; the results are: Analysis of overhead costs Monthly volume Cost per month (£) 192,000 89,600 85,800 91,200 101,400 560,000 Alpha Process cost Omega Process cost 960 hours 2,560 hours 520 set-ups 380 movements Set-up cost Handling charges Other overheads Total overhead costs There are 2,000 direct labour hours available each month. (see below) Two of KENT's products are a JTI01 and a GR27. JT101S are produced by the Alpha Process in a simple operation. GR275 are manufactured by the Omega Process. Both products are sold by the metre. Details of the two products are: JT101 1,000 metres 1,000 metres GR27 500 metres Monthly volume Batch size Processing time per batch Alpha Omega Set-ups per batch Handling charges per batch Materials per metre Direct labour per metre (Direct cost) Direct labour is paid at £16 per hour. 50 metres 100 hours 25 hours 2 set-ups 5 movements £15 hour 1 set-up 1 movement £16 /½ hour Q. What is the set-up cost per metre for JT101S 42.9 O 0.165 O 1 0 165 O
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