University Help!!!!!

Hino

Hiya Guys..Just cant work out this problem correctly and its very easy but just suffering a brain freeze at the moment.

Question: A company absorbs overheads on labour hours which were budgeted at 15000 hours with budgeted overhead of $360,000. Actual results were 14750 labour hours with actual overheads of $365,000.


Over Heads Where?


Answer:???? Please Help

Newaglish

If it's a variances question:

Overhead Rate Variance
($24.75 - $24) * 14,750 = $11,000 (A)

Overhead Efficiency Variance
(15,000 - 14,750) * $24 = $6,000 (F)

Adverse overhead variance of $5,000.

Is this actually your question? It might help if you let us know!

PS. I'd need actual and budgeted output for this to actually be correct.

Hino

Thats the question but it give 4 possible answers

A. Under Absorbed by 11000
B. Over Absorbed by 11000
c. Under Absorbed by 5000
D. None of the above


Also i have 2 other question that are racking my brains.

Question: Process Z has no opening stock. 15,000 units of raw materials were transferred in at €6.00 per unit at the
start of the process. Other process costs amounted to €66,000.The process is expected to lose 10% of input
and this can be sold for €5.00 per unit. Actual output for the process was 12,500 units. The value of the
abnormal loss as recorded in the profit & loss account is:
A. €4,000
B. €6,000
C. €9,000
D. None of the above



Question 2: B Ltd has the following information available for Process E:
Materials: €240,000
Labour costs: €140,400
Closing Stock – Finished Goods 8,000 units
Work in progress 4,000 units
Assume that work-in-progress is fully complete for materials and 70% complete for labour costs.
The value of the work in progress closing stock for Process E:
A. €116,400
B. €132,000
C. €106,364
D. None of the above



Any detailed Explainations are very much welcomed and thanks in advance

jhn_noln

just have time to answer first one!!

you first work out budgeted overhead absorption rate, which will be the 360000 divided by the 15000 hours giving you €24 per hour!

thus if 14750 hours were used and budgeted o/h rate is €24 then budgeted o/h is 24* 14750 = 354000

and if actual is 365000, then it is underabsorbed by €11000

hivizman

For question 1, work out the "standard cost" of a unit of production. 15,000 units of materials at €6.00 per unit cost €90,000, plus the other costs of €66,000 total €156,000. From this, deduct the proceeds expected from the sale of the normal loss of 10% of 15,000 units, that is 1,500 units at €5.00 per unit, or €7,500. This gives the standard cost of the 13,500 units expected to be produced as €148,500, or €11.00 per unit.

If the actual level of output is 12,500 units, then the abnormal loss is 1,000 units. This would be costed at standard cost as €11,000 (1,000 units at €11 per unit). However, on the assumption that all lost units can be sold at €5.00 per unit, it is necessary to deduct the expected revenue of €5,000 (1,000 abnormal loss units at €5.00 per unit). This leaves an abnormal loss of €6,000.

For question 2, use the idea of "equivalent units". Assuming no opening stock and no sales, all production is represented by work in progress or finished goods. The equivalent units produced in terms of materials are 8,000+4,000 (as the work in progress is 100% complete in terms of materials), or 12,000 equivalent units. As the total cost of materials was €240,000, the cost per equivalent unit is €20. For labour, the equivalent units are 8,000+70% of 4,000 or 10,800 (as the work in progress is 70% complete in terms of labour). As the total cost of labour is €140,400, the cost per equivalent unit is €13. Thus the cost of work in progress is:

4,000 * 20 + 4,000 * 70% * 13 = €116,400.

Hino

Cheers Guys for the help have a exam tomoro so needed ASAP.

Much Appreciated

Hino