Financial Accunting Revision Solutions

Financial Accunting Revision Solutions - 1 i a Percentage...

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1) i) a) Percentage on direct labour cost rate Department A Department B £90,000 £85,000 £150,000 = 60% on direct labour cost £23,375 = 364% on direct labour cost (rounded) b) Direct labour hour rate Department A Department B £90,000 £85,000 15,000 hours = £6 per direct labour 2,125 hours = £40 per hour direct labour hour (rounded) c) Machine hour rate Department A Department B £90,000 £85,000 3,000 hours = £30 per machine hour 42,500 hours = £2 per machine hour 1
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ii) a) The percentage on direct labour cost method is relatively easy to use since direct labour cost is often charged to cost units or products and therefore may be used as a basis for attracting overheads to products. However, there are a number drawbacks. For example, many overheads are incurred on a time basis, and the use of direct labour does not use a time factor only. In addition, when operators are paid different hourly rates of pay, this method results in an inequitable charge of overheads to different products. b) The rate per direct labour hour is often preferable and would
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  • Spring '14
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