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Accounting June 2008 Paper 2 Question 2a

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Wickham Associates, a manufacturer of precision parts, has three categories of overhead costs: machine operating, engineering and inspecting.

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Sherrel Joseph

CXC CAPE Advanced Level Accounting Unit 2

June 2008 Paper 2 Question 2a



Overhead Rate per Machine Hour

= Estimated Total Overhead Cost

Estimated Level of Activity

= $1800000 = $9 per machine hour

200000 machine hours



Total Cost of the Proposed Job (Traditional Job Order Costing)

$
Direct Material 16000
Direct Labour 24000
Manufacturing Overhead (Machine Hours)
- 4000 hours x $9 36000
Total Cost 76000



Activity Cost Driver Rate

= Estimated Cost of Activity

Total Capacity for Activity Driver



1. Machining = $880000 = $4.40 per machine hour
200000
2. Setup Equipment = $120000 = $400 per setup
300
3. Engineering = $440000 = $22 per engineering hour
20000
4. Inspecting = $360000 = $30 per inspection
12000

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Subjects

  • accounts
  • costing
  • direct materials
  • direct labour
  • activity cost driver rate
  • overhead rate per machine hour

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