Sage Products Ltd manufactures goods which could involve any or all of three production departments. These departments are simply entitled X, Y and Z. A direct wages cost percentage absorption rate for the recovery of production overheads for each department is applied to individual job costs. Details from the company’s budgets for the year ended 31 March 2021 are as follows: Dept X Dept Y Dept Z Indirect materials $23,000 $35,000 $57,000 Indirect wages $21,000 $34,000 $55,000 Direct wages $140,000 $200,000 $125,000 Direct labour hours 25,000 50,000 60,000 Machine hours 100,000 40,000 10,000 The following information is also available for the production departments: Dept X Dept Y Dept Z Area (square metres) 30,000 20,000 10,000 Cost of machinery $220,000 $160,000 $20,000 Horse power of machinery 55 30 15 Other budgeted figures are: $ Power 1 20,000 Rent, rates, light, heat 90,000 Insurance (machinery) 20,000 Depreciation 80,000 Machinery is depreciated on the basis of 20% on cost. Job No. 457 passed through all three departments and incurred the following actual direct costs and times: Direct Direct Direct labour Machine material wages hours hours $ $ Dept X 152 88 35 60 Dept Y 85 192 90 30 Dept Z 52 105 45 10 A sum amounting to 30% of the production cost is added to every job to enable a selling price to be quoted. Required: a. A statement to show the total production overheads per department and calculate the absorption rates which the company has adopted. b. Calculate the selling price to be quoted for Job No. 457.
Sage Products Ltd manufactures goods which could involve any or all of three production
departments. These departments are simply entitled X, Y and Z. A direct wages cost percentage
absorption rate for the recovery of production
individual job costs.
Details from the company’s budgets for the year ended 31 March 2021 are as follows:
Dept X Dept Y Dept Z
Indirect materials $23,000 $35,000 $57,000
Indirect wages $21,000 $34,000 $55,000
Direct wages $140,000 $200,000 $125,000
Direct labour hours 25,000 50,000 60,000
Machine hours 100,000 40,000 10,000
The following information is also available for the production departments:
Dept X Dept Y Dept Z
Area (square metres) 30,000 20,000 10,000
Cost of machinery $220,000 $160,000 $20,000
Horse power of machinery 55 30 15
Other budgeted figures are:
$
Power 1 20,000
Rent, rates, light, heat 90,000
Insurance (machinery) 20,000
Depreciation 80,000
Machinery is
Job No. 457 passed through all three departments and incurred the following actual direct costs
and times:
Direct Direct Direct labour Machine
material wages hours hours
$ $
Dept X 152 88 35 60
Dept Y 85 192 90 30
Dept Z 52 105 45 10
A sum amounting to 30% of the production cost is added to every job to enable a selling price to
be quoted.
Required:
a. A statement to show the total production overheads per department and calculate the
absorption rates which the company has adopted.
b. Calculate the selling price to be quoted for Job No. 457.
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