The following are the budgeted details are available from the records of a manufacturing company SP Ltd.: Particulars ₹ Direct Materials 2,13,000…
CA Intermediate · Cost and Management Accounting · MTP · May 2024
The following are the budgeted details are available from the records of a manufacturing company SP Ltd.: Particulars ₹ Direct Materials 2,13,000 Direct Wages: Machine Shop (12,000 hours) 63,000 Assembly Shop (10,000 hours) 48,000 1,11,000 Works Overhead: Machine Shop 88,200 Assembly Shop 51,800 1,40,000 Administrative Overhead 92,800 Selling Overhead 81,000 Distribution Overhead 62,100 You are required to: PREPARE a Schedule of Overhead Rates from the figures available stating the basis of overhead recovery rates used under the given circumstances.WORK OUT a Cost Estimate for the following job based on overhead calculated on above basis. Direct Material: 25 kg @17.20/kg 15 kg @21.00/kg Direct labour: (On the basis of hourly rate Machine shop 30 hours For machine shop and assembly shop) Assembly shop 42 hours
Suggested Answer and Working Notes:
Schedule of Overhead Rate (i) Works Overhead: Hourly rate = (Overhead amount ÷ Hours) Machine shop = (88,200 ÷ 12,000) = 7.35 per hourAssembly shop = (51,800 ÷ 10,000) = 5.18 per hour (ii) Administrative Overhead as a % of works cost = (92,800 / 4,64,000) × 100 = 20% (iii) Selling and distribution overhead as % of works cost = ((81,000 + 62,100) / 4,64,000) × 100 = 30.84% Labour hour rates are calculated as under: Machine shop = 63,000 ÷ 12,000 hrs. = 5.25Assembly shop = 48,000 ÷ 10,000 hrs. = 4.80 Cost Estimate for Job Particulars ₹ Direct Materials (i) 25 kg @17.20 per kg 430 (ii) 15 kg @21 per kg 315 745.00 Direct Labour Machine shop (30 hrs. @5.25) 157.50 Assembly shop (42 hrs. @4.80) 201.60 359.10 Prime Cost 1104.10 Works Overhead Machine shop (30 hours @7.35) 220.50 Assembly shop (42 hours @5.18) 217.56 438.06 Works Cost 1542.16 Administration overhead (20% of works cost) 308.43 Cost of Production 1850.59 Selling and distribution cost (30.84% of works cost) 475.60 Total Estimated Cost 2326.19
Topics: Job Costing
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