1. Calculate the full cost of job number PCJ 61263, assuming overheads are charged to jobs on a direct labour hour basis. 2. Calculate the full cost of job number PCJ 61263, assumi... 1. Calculate the full cost of job number PCJ 61263, assuming overheads are charged to jobs on a direct labour hour basis. 2. Calculate the full cost of job number PCJ 61263, assuming overheads are charged to jobs on a machine hour basis.
Understand the Problem
The question is asking for the full cost calculation of a specific job, considering both direct labour hours and machine hours for overhead absorption. It requires the user to compute the overhead absorption rate and to calculate costs based on this rate for the given job.
Answer
The total cost for job PCJ 61263 is £11,540.
Answer for screen readers
The full cost for job number PCJ 61263, assuming overheads are charged based on direct labour hours, is £11,540.
Steps to Solve
- Calculate the Overhead Absorption Rate To find the overhead absorption rate based on direct labour hours, use the formula: $$ \text{Overhead Absorption Rate} = \frac{\text{Total Monthly Overheads}}{\text{Total Direct Labour Hours per Month}} $$
Given:
- Total Monthly Overheads = £9,400
- Total Direct Labour Hours per Month = 4,000
Now substitute the values: $$ \text{Overhead Absorption Rate} = \frac{9,400}{4,000} = 2.35 , \text{per direct labour hour} $$
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Calculate Total Labour Cost for Job PCJ 61263 The total labour cost is calculated using the total hours worked and wage rate: $$ \text{Total Labour Cost} = \text{Direct Labour Hours} \times \text{Wage Rate} $$ Substituting the values: $$ \text{Total Labour Cost} = 400 \times 20 = 8,000 $$
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Calculate Applied Overheads for Job PCJ 61263 Based on Direct Labour The applied overheads for job PCJ 61263 is determined as follows: $$ \text{Applied Overhead} = \text{Overhead Absorption Rate} \times \text{Direct Labour Hours} $$ Substituting: $$ \text{Applied Overhead} = 2.35 \times 400 = 940 $$
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Calculate Total Cost for Job PCJ 61263 Finally, calculate the total cost by adding the direct materials, total labour cost, and applied overhead: $$ \text{Total Cost} = \text{Direct Materials} + \text{Total Labour Cost} + \text{Applied Overhead} $$ Substituting: $$ \text{Total Cost} = 2,600 + 8,000 + 940 = 11,540 $$
The full cost for job number PCJ 61263, assuming overheads are charged based on direct labour hours, is £11,540.
More Information
Understanding how overheads are absorbed by jobs is critical for cost management in any project. This process helps allocate indirect costs proportionately to specific jobs based on the usage of resources like labour and machinery.
Tips
- Miscalculating overhead absorption by confusing direct labour hours with machine hours.
- Forgetting to include direct materials in the total cost.
- Incorrectly applying the overhead absorption rate to the wrong metric.
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