Question 3 The following information relates to Bookdon Plc. A small jobbing com

Question

Question 3 The following information relates to Bookdon Plc. A small jobbing company, for the coming year. The business has two production departments, Department X and Department Y, and one service department, department S. Production Dept.X production service Dept.Y Dept.S costs allocated Per department Service cost allocated Machine hours Labour hours 16,000 8.000 12,000 75% 800 hours 25% 500 hours details of a customer's job no. 350 are as follows The Direct materials Direct labour Hours in Dept X Hours in Dept Y : 4,200 1,500 12 hours 4 hours You are required to (a) Apportion/divide the costs of service department S between department X and Department Y. (20 marks) (b) Calculate the overhead absorption rate for department X using machine hours. (20 marks) (c) Calculate the overhead absorption rate for department Y using labour hours. (20 marks) (d) Calculate the cost of job no.350. (30 marks) (e) Calculate the selling price ofjob no. 350 if the mark-up is 25% of cost. (10marks)

Explanation / Answer

Solution a) The costs of the service department S is being allocated in the ratio of 75:25 between Department X and Department Y

Department X = 75% of €12000

= €9000 ( answer)

Department Y = 25% of €12000

= €3000 ( answer)

Solution b) overhead absorption rate for department X = Cost allocated / Number of machine hours

= €16000/800 machine hours

= €20 per hours ( answer)

Solution c) overhead absorption rate for department Y= Cost allocated / Number of Labour hours

= €8000/500 labour hours

= €16 per hours (answer)

Solution d) Calculation of cost of job no. 350

Direct material = €4200

Direct Labour = €1500

Hours in dept X = 12 hours * 20 per hour = €240

Hours in dept Y = 4 hours * 16 per hour = €64

total cost of job no.350 = €6004 (answer)

Solution d) The selling price of job no.350 if the markup is 25%of cost

= €6004 + 25% of €6004

= €6004 + €1501

= €7505 ( answer)

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