OVERHEAD ABSORPTION RATE
JTM Ltd is looking to calculate the unit cost for one of
its products. It needs to calculate an overhead absorption rate to apply to
each unit. The methods it is considering are:
·
direct
labour hours
·
machine
hours
The factory activity forecast is as below:
Machine
hours |
15,000
hrs |
Labour
hours |
21,000
hrs |
Overheads |
£672,000 |
(i) Complete the table below to show the possible overhead
absorption rates that JTM Ltd could use.
|
Machine hour |
Labour hour |
Overheads
(£) |
|
|
Activity |
|
|
Absorption
rate (£) |
|
|
Answer:
|
Machine hour |
Labour hour |
Overheads
(£) |
672,000 |
672,000 |
Activity |
15,000 hrs |
21,000 hrs |
Absorption
rate (£) |
44.80 |
32.00 |
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