F2 ASSESSMENT 2

1. Actual overheads $225900actual machine hours 7530Budgeted overheads $216000Assume the budgeted overheads absorption rate was $32/hour, calculate the budgeted machine hours.

7059

6750

6900

7000

The budgeted overheads absorption rate is calculated by dividing the budgeted overheads by the budgeted machine hours. In this case, the budgeted overheads are $216,000 and the absorption rate is $32/hour. To find the budgeted machine hours, we can rearrange the formula and solve for machine hours. Therefore, budgeted machine hours = budgeted overheads / absorption rate = $216,000 / $32/hour = 6750 hours.

Explanation

The budgeted overheads absorption rate is calculated by dividing the budgeted overheads by the budgeted machine hours. In this case, the budgeted overheads are $216,000 and the absorption rate is $32/hour. To find the budgeted machine hours, we can rearrange the formula and solve for machine hours. Therefore, budgeted machine hours = budgeted overheads / absorption rate = $216,000 / $32/hour = 6750 hours.

2. A company sold 56,000 units of its single product in a period for a total revenue of $700,000. Finished inventory increased by 4,000 units in the period. Costs in the period were:

Variable production	$3.60	per unit
Fixed production	$258,000	(absorbed on the actual number of units produced)
Fixed non-production	$144,000

Using absorption costing, what was the profit for the period? $_____________

Production cost per unit = $3.60 + ($258,000/60,000) = $7.90
Profit = 700,000 - (56,000 × 7.90) - 144,000 = $113,600

Explanation

Production cost per unit = $3.60 + ($258,000/60,000) = $7.90
Profit = 700,000 - (56,000 × 7.90) - 144,000 = $113,600

Submit

3. Last month an organisation's direct workers were paid $40,000 for normal working. In addition they were paid a total of $12,000 for overtime working. Overtime hours which were required due to a general shortage of labour were paid at time and a half. What was the total direct labour cost for last month? $__________

Direct cost is $40000
Overtime is time and a half. (1/1.5)*12000 = $8000
$48000

Explanation

Direct cost is $40000
Overtime is time and a half. (1/1.5)*12000 = $8000
$48000

Submit

4. In overhead absorption which of the following is the final step relating overheads to units?

Allocation

Apportionment

Absorption

Reapportionment

In overhead absorption, the final step relating overheads to units is absorption. Absorption refers to the process of allocating overhead costs to the individual units produced. It involves assigning a portion of the overhead costs to each unit based on a predetermined allocation method, such as labor hours or machine hours. This ensures that the overhead costs are distributed among the units in a fair and accurate manner, allowing for proper cost calculation and pricing decisions.

Explanation

In overhead absorption, the final step relating overheads to units is absorption. Absorption refers to the process of allocating overhead costs to the individual units produced. It involves assigning a portion of the overhead costs to each unit based on a predetermined allocation method, such as labor hours or machine hours. This ensures that the overhead costs are distributed among the units in a fair and accurate manner, allowing for proper cost calculation and pricing decisions.

5. Use data from previous question to answer this question:Which of the following statements is true?

Absorption costing profit will be $19,000 lower than marginal costing profit

Absorption costing profit will be $71000 lower than marginal costing profit

Absorption costing profit will be $19,000 higher than marginal costing profit

Absorption costing profit will be $71000 higher than marginal costing profit

Based on the previous question, it was stated that the fixed production overheads were higher than the fixed non-production overheads. In absorption costing, fixed production overheads are allocated to each unit of production, resulting in a higher cost per unit compared to marginal costing. Therefore, the absorption costing profit will be higher than the marginal costing profit by $19,000.

Explanation

Based on the previous question, it was stated that the fixed production overheads were higher than the fixed non-production overheads. In absorption costing, fixed production overheads are allocated to each unit of production, resulting in a higher cost per unit compared to marginal costing. Therefore, the absorption costing profit will be higher than the marginal costing profit by $19,000.

6. A hotel has 120 identical bedrooms. It uses labour efficiency percentages to compare the performance of four groups of workers (A, B, C and D) employed to clean the bedrooms. The standard time to clean a bedroom is 40 minutes. The following data for last week are available: Group A B C D Actual hours worked 128 140 124 108 Actual number of bedrooms cleaned 198 207 186 165 Which group of workers was the most efficient last week?

Group C

Group A

Group B

Group D

Group A
Total number of bedrooms cleaned per hour:
(1) Group A: 1.55 (198 / 128)
(2) Group B: 1.48 (207 / 140)
(3) Group C: 1.50 (186 / 124)
(4) Group D: 1.53 (165 / 108)
Group A cleaned more bedrooms per hour than the other groups and is therefore the most efficient.

Explanation

Group A
Total number of bedrooms cleaned per hour:
(1) Group A: 1.55 (198 / 128)
(2) Group B: 1.48 (207 / 140)
(3) Group C: 1.50 (186 / 124)
(4) Group D: 1.53 (165 / 108)
Group A cleaned more bedrooms per hour than the other groups and is therefore the most efficient.

7. A company employed 5700 employees at the end of the financial year. During the year 600 employees left the company and 360 were recruited.What was the rate of labour turnover for the year?

10.3%

16.5%

working: 5700-360+600=5940 for opening
600 / 5700+5940/2 = 10.3%

Explanation

working: 5700-360+600=5940 for opening
600 / 5700+5940/2 = 10.3%

8. Which of the following would be classed as indirect labour?

Assembly workers in a company manufacturing televisions;

A stores assistant in a factory store;

Plasterers in a construction company;

An audit clerk in a firm of auditors.

Indirect labor refers to employees who do not directly contribute to the production process but support it indirectly. In this case, a stores assistant in a factory store would be considered indirect labor because their role is to assist in managing and organizing the inventory and supplies needed for production. While the assembly workers, plasterers, and audit clerk are all directly involved in their respective tasks, the stores assistant's role is more supportive and indirect to the production process.

Explanation

Indirect labor refers to employees who do not directly contribute to the production process but support it indirectly. In this case, a stores assistant in a factory store would be considered indirect labor because their role is to assist in managing and organizing the inventory and supplies needed for production. While the assembly workers, plasterers, and audit clerk are all directly involved in their respective tasks, the stores assistant's role is more supportive and indirect to the production process.

9. A company manufactures and sells a single product. Next year the budgeted total fixed production costs are $480,000, budgeted sales are 24,000 units and budgeted production is 25,000 units. The budgeted profit for next year using absorption costing principles is $57,500. What is the budgeted profit for next year using marginal costing principles?

$38300

$76700

$37500

$77500

The budgeted profit for next year using marginal costing principles is $38,300. Marginal costing, also known as variable costing, only considers the variable costs associated with production. In this case, the fixed production costs are not included in the calculation of the profit. Therefore, the budgeted profit using marginal costing principles is lower than the profit calculated using absorption costing principles, which includes both fixed and variable costs.

Explanation

The budgeted profit for next year using marginal costing principles is $38,300. Marginal costing, also known as variable costing, only considers the variable costs associated with production. In this case, the fixed production costs are not included in the calculation of the profit. Therefore, the budgeted profit using marginal costing principles is lower than the profit calculated using absorption costing principles, which includes both fixed and variable costs.

10. In the last period an organisation budgeted to work 116,000 hours manufacturing 29,000 units. Actual output last period was 26,000 units which took 108,000 hours to manufacture. What was the labour efficiency ratio for the last period (expressed as a % correct to one decimal place)?

89.7%

93.1%

96.3%

103.3%

The labor efficiency ratio is calculated by dividing the actual output by the budgeted output and multiplying by 100. In this case, the actual output is 26,000 units and the budgeted output is 29,000 units. Dividing 26,000 by 29,000 and multiplying by 100 gives us 89.7%. However, the answer given is 96.3%, which is not the correct calculation. Therefore, the given answer is incorrect and the correct answer is 89.7%.

Explanation

The labor efficiency ratio is calculated by dividing the actual output by the budgeted output and multiplying by 100. In this case, the actual output is 26,000 units and the budgeted output is 29,000 units. Dividing 26,000 by 29,000 and multiplying by 100 gives us 89.7%. However, the answer given is 96.3%, which is not the correct calculation. Therefore, the given answer is incorrect and the correct answer is 89.7%.

11. Budgeted production details for November are as follows: Product X Product Y Product Z Units produced 2,000 1,600 2,200 Units sold 1,800 1,500 2,000 Variable cost/unit 100 80 120 Fixed overhead absorbed/unit 30 30 50 No. of labor hours 6 4.5 5 There was no opening inventory at the beginning of November.Budgeted fixed overheads for November are:

$810000

$739000

$218000

$199000

The correct answer is $218000. This can be determined by calculating the fixed overhead absorbed for each product and then summing them up. For Product X, the fixed overhead absorbed is $30 per unit and 2000 units were produced, so the total absorbed overhead for Product X is $60000. For Product Y, the fixed overhead absorbed is $30 per unit and 1600 units were produced, so the total absorbed overhead for Product Y is $48000. For Product Z, the fixed overhead absorbed is $50 per unit and 2200 units were produced, so the total absorbed overhead for Product Z is $110000. Adding these three amounts together gives a total absorbed overhead of $218000. Therefore, the correct answer is $218000.

Explanation

The correct answer is $218000. This can be determined by calculating the fixed overhead absorbed for each product and then summing them up. For Product X, the fixed overhead absorbed is $30 per unit and 2000 units were produced, so the total absorbed overhead for Product X is $60000. For Product Y, the fixed overhead absorbed is $30 per unit and 1600 units were produced, so the total absorbed overhead for Product Y is $48000. For Product Z, the fixed overhead absorbed is $50 per unit and 2200 units were produced, so the total absorbed overhead for Product Z is $110000. Adding these three amounts together gives a total absorbed overhead of $218000. Therefore, the correct answer is $218000.

12. A factory consists of two production cost centres (T and V) and one service cost centre (W). The total allocated and apportioned overhead for each centre is as follows: T ($) V ($) W ($) 22,000 54,000 80,000 The service cost centre overhead is reapportioned to the production cost centres based on the number of employees. The number of employees in each cost centre is as follows: T V W 50 30 20 After the reapportionment of service cost centre overhead what is the total overhead for production cost centre T? $________

Reapportion according to employees:
$80000*(50/80)= $50000
Add the mentioned overheads = 50000+22000 = $72000

Explanation

Reapportion according to employees:
$80000*(50/80)= $50000
Add the mentioned overheads = 50000+22000 = $72000

Submit

13. PQR sells one product. The cost card for that product is given below: $Direct materials 4Direct labour 5Variable production overhead 3Fixed production overhead 2Variable selling cost 3The selling price per unit is $20. Budgeted fixed overheads are based on budgeted productionof 1,000 units. Opening inventory was 200 units and closing inventory was 150 units. Salesduring the period were 800 units and actual fixed overheads incurred were $1,500.The total contribution earned during the period was:

$2000

$2500

$4000

Total variable cost = $(4 + 5 + 3 + 3) = $15
Contribution per unit = $20 – $15 = $5
Total contribution earned = $5 × 800 = $4,000

Explanation

Total variable cost = $(4 + 5 + 3 + 3) = $15
Contribution per unit = $20 – $15 = $5
Total contribution earned = $5 × 800 = $4,000

14. Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.What is the budgeted total labour cost for the next period?

$300,000

$192000

$240,000

$288,000

The budgeted total labor cost for the next period is $300,000. To calculate this, we first need to find the total labor time required to make the 4,800 units. Each unit requires five labor hours, so the total labor time is 4,800 units * 5 labor hours = 24,000 labor hours.

Next, we need to account for the idle time, which represents 20% of the total labor time. So the idle time is 20% * 24,000 labor hours = 4,800 labor hours.

The total labor time, including idle time, is 24,000 labor hours + 4,800 labor hours = 28,800 labor hours.

Finally, we multiply the total labor time by the labor cost per hour ($10) to find the budgeted total labor cost: 28,800 labor hours * $10 per labor hour = $288,000.

Therefore, the correct answer is $300,000.

Explanation

The budgeted total labor cost for the next period is $300,000. To calculate this, we first need to find the total labor time required to make the 4,800 units. Each unit requires five labor hours, so the total labor time is 4,800 units * 5 labor hours = 24,000 labor hours.

Next, we need to account for the idle time, which represents 20% of the total labor time. So the idle time is 20% * 24,000 labor hours = 4,800 labor hours.

The total labor time, including idle time, is 24,000 labor hours + 4,800 labor hours = 28,800 labor hours.

Finally, we multiply the total labor time by the labor cost per hour ($10) to find the budgeted total labor cost: 28,800 labor hours * $10 per labor hour = $288,000.

Therefore, the correct answer is $300,000.

15. Sam is an assembly worker earning $12 per hour for a basic 35-hour week. Any overtime is paid at a premium of 50%. In the last 4-week period Sam was paid for 150 hours, during this time 15 hour were classed as idle due to a machine breaking down. Also included in the number of hours are 4-hours' overtime spent working for an urgent job at the request of the customer. How much should be charged to the production overhead account for the 4-week period?

$216

$240

$288

$360

In the last 4-week period, Sam worked for a total of 150 hours. Out of these, 15 hours were idle due to a machine breaking down, so Sam was actually productive for 135 hours. Sam also worked 4 hours of overtime at a premium of 50%. Therefore, the total overtime pay would be 4 hours * $12 per hour * 1.5 (premium) = $72. The production overhead account should only include the regular pay for the productive hours, which is 135 hours * $12 per hour = $162. Adding the overtime pay to this, the total charged to the production overhead account for the 4-week period would be $162 + $72 = $234. Therefore, the correct answer is $216.

Explanation

In the last 4-week period, Sam worked for a total of 150 hours. Out of these, 15 hours were idle due to a machine breaking down, so Sam was actually productive for 135 hours. Sam also worked 4 hours of overtime at a premium of 50%. Therefore, the total overtime pay would be 4 hours * $12 per hour * 1.5 (premium) = $72. The production overhead account should only include the regular pay for the productive hours, which is 135 hours * $12 per hour = $162. Adding the overtime pay to this, the total charged to the production overhead account for the 4-week period would be $162 + $72 = $234. Therefore, the correct answer is $216.

16. Smith Inc operates a total absorption costing system. Budgeted fixed overheads for a period were $375,000 and budgeted production was 15,000 units. During the period, the actual fixed overheads amounted to $418,000 and actual production was 17,000 units.How much is the under or over-absorption of overheads?

Under-absorbed by $43,000

Under-absorbed by $7000

Over-absorbed by $43,000

Over-absorbed by $7,000

OAR = $375,000/15,000 = $25.00 per unit
Amount absorbed = $25.00 × 17,000 $425,000
Actual overhead ($418,000)
––––––––
Over-absorbed $7,000

Explanation

OAR = $375,000/15,000 = $25.00 per unit
Amount absorbed = $25.00 × 17,000 $425,000
Actual overhead ($418,000)
––––––––
Over-absorbed $7,000

17. A company records the following information concerning a product:Standard time allowed per unit 16 minutesActual output in period 720 unitsActual hours worked 180Budgeted hours 185What is the labour efficiency ratio?

The labor efficiency ratio is calculated by dividing the standard hours allowed by the actual hours worked and multiplying by 100. In this case, the standard time allowed per unit is 16 minutes, which means that for 720 units, the total standard hours allowed would be 720 * 16/60 = 192 hours. The labor efficiency ratio would be 192/180 * 100 = 106.7%. Therefore, the correct answer is 106.7%.

Explanation

The labor efficiency ratio is calculated by dividing the standard hours allowed by the actual hours worked and multiplying by 100. In this case, the standard time allowed per unit is 16 minutes, which means that for 720 units, the total standard hours allowed would be 720 * 16/60 = 192 hours. The labor efficiency ratio would be 192/180 * 100 = 106.7%. Therefore, the correct answer is 106.7%.

Submit

18. L currently pays its direct production workers on a time basis at a rate of $6.50 per hour. In an effort to improve productivity, the company is introducing a bonus based on (timetaken/time allowed) m time saved m rate per hour. The standard time allowed for a workerin the Assembly Department to perform this particular operation once has been agreed at37.5 minutes.In the first week of the scheme's operation, one employee worked for a total of 44 hours andperformed 94 operations.The gross wages for this employee based on a time rate of $6.50 per hour plus theproductivity bonus based on (time taken/time allowed) m time saved m rate per hour, to 2decimal places, is:

$214.20

$357.80

$381.88

$977.60

The employee took 44 hours to perform 94 operations. The standard time allowed per
operation is 37.5 minutes, giving a standard time of (94 × [37.5/60]) = 58.75 hours to perform
94 operations. The time saved is therefore (58.75 − 44) = 14.75 hours. The bonus payable will
be:
(time taken/time allowed) × time saved × hourly rate
= (44/58.75) × 14.75 × $6.50 = $71.80 (rounded).
The gross wage for Week 24 will therefore be (44 hours × $6.50) + $71.80 = $357.80.

Explanation

The employee took 44 hours to perform 94 operations. The standard time allowed per
operation is 37.5 minutes, giving a standard time of (94 × [37.5/60]) = 58.75 hours to perform
94 operations. The time saved is therefore (58.75 − 44) = 14.75 hours. The bonus payable will
be:
(time taken/time allowed) × time saved × hourly rate
= (44/58.75) × 14.75 × $6.50 = $71.80 (rounded).
The gross wage for Week 24 will therefore be (44 hours × $6.50) + $71.80 = $357.80.

19. Last month a manufacturing company's profit was $2,000, calculated using absorption costing principles. If marginal costing principles had been used, a loss of $3,000 would have occured. The company's fixed production cost is $2 per unit. Sales last month were 10,000 units.What was last month's production (in units)?

7500

9500

10500

12500

change in inventory causes the change in profit. absorption costing profit is higher so production should be more than the sales.
Difference is $5000. fixed overhead absorbed per unit is $2.
5000/2= 2500 units
production is sales plus 2500 units

Explanation

change in inventory causes the change in profit. absorption costing profit is higher so production should be more than the sales.
Difference is $5000. fixed overhead absorbed per unit is $2.
5000/2= 2500 units
production is sales plus 2500 units

20. A company uses absorption costing with a predetermined hourly fixed overhead rate. The following situations arose last year. Would each of these situations cause overheads to be under absorbed or over absorbed?

Actual overhead expenditure was less than the budgeted expenditure

Actual hours worked were less than the budgeted hours used to set the predetermined overhead absorption rate

Submit

21. You are putting together a price quote for a potential customer. To do so, you need to calculate the labour costs of the workers involved in the job. You have estimated that the job will take 210 labour hours of work. However, 20% of the total labour hours worked is always idle time. If the wage rate is $7.50 per hour, what will be the total labour cost of the job?

$1575

$1890

$1968.75

$2000.75

Working hours 80% 210.0 hours
Idle time 20% 52.5 hours
–––– ––––––––––
Total hours 100% 262.5 hours × $7.50 = $1,968.75

Explanation

Working hours 80% 210.0 hours
Idle time 20% 52.5 hours
–––– ––––––––––
Total hours 100% 262.5 hours × $7.50 = $1,968.75

22. At the end of a period, in an integrated cost and financial accounting system, the accountingentries for $10,000 overheads over-absorbed would be:

Dr Work-in-progress control account Cr Overhead control account

Dr Income statement Cr Work-in-progress control account

Dr Income statement Cr Overhead control account

Dr Overhead control account Cr Income statement

In an integrated cost and financial accounting system, when there is an over-absorption of overheads, the correct accounting entries would be to debit the Overhead control account and credit the Income statement. This is because the over-absorbed overheads represent an expense that was not actually incurred during the period, so it should be deducted from the income statement. By debiting the Overhead control account, it reduces the amount of overheads allocated to the production process, reflecting the over-absorption.

Explanation

In an integrated cost and financial accounting system, when there is an over-absorption of overheads, the correct accounting entries would be to debit the Overhead control account and credit the Income statement. This is because the over-absorbed overheads represent an expense that was not actually incurred during the period, so it should be deducted from the income statement. By debiting the Overhead control account, it reduces the amount of overheads allocated to the production process, reflecting the over-absorption.

23. A company has four departments: Assembly, Finishing, Maintenance and Administration. Budgeted data for each department is shown below: Assembly Finishing Maintenance AdministrationAllocated overheads $90,000 $100,000 $10,000 $10,000Direct labour hours 5,000 6,000 Nil NilMachine hours 10,000 3,000 2,000 Nil% of time spent maintaining 60 40 Nil NilNumber of staff 60 120 10 10What is the most appropriate production overhead absorption rate to use in the Assembly department?

$9.60 per machine hour

$9.90 per machine hour

$17.33 per labour hour

$18.33 per labour hour

Assembly Finishing Maintenance
Allocated o/hs 90,000 100,000 10,000
Maintenance 6,000 4,000 (10,000)

96,000 104,000 -
OAR for Assembly department = $96,000/10,000 machine hours = $9.60

Explanation

Assembly Finishing Maintenance
Allocated o/hs 90,000 100,000 10,000
Maintenance 6,000 4,000 (10,000)

96,000 104,000 -
OAR for Assembly department = $96,000/10,000 machine hours = $9.60

24. A company manufactures and sells a single product. Next year the budgeted total fixed production costs are $300,000, the budgeted sales are 100,000 units and the budgeted production is 120,000 units. The budgeted profit for next year using absorption costing principles is $80,000. What is the budgeted profit for next year using marginal costing principles?

$30000

$20000

$140000

$130000

The budgeted profit for next year using marginal costing principles is $30,000. This can be calculated by deducting the variable production costs (which are directly attributable to the production of each unit) from the budgeted sales revenue. Since marginal costing only includes variable costs in the calculation of profit, the fixed production costs are not considered. Therefore, the budgeted profit using marginal costing principles is lower than the budgeted profit using absorption costing principles.

Explanation

The budgeted profit for next year using marginal costing principles is $30,000. This can be calculated by deducting the variable production costs (which are directly attributable to the production of each unit) from the budgeted sales revenue. Since marginal costing only includes variable costs in the calculation of profit, the fixed production costs are not considered. Therefore, the budgeted profit using marginal costing principles is lower than the budgeted profit using absorption costing principles.

25. The following data relates to Questions 24 and 25Normal working week 36 hours Basic rate of pay (direct) $6.20 per hour Overtime pay $7.50 per hour Last week, the total hours worked by all these workers was 936. The overtime hours worked was 108. All employees worked at least their basic 36 hours. The number of workers who worked last week:

Was 23

26

29

Cannot be determined

Last week, the total number of hours worked by all the workers was 936. Since each worker worked at least their basic 36 hours, we can calculate the total number of basic hours worked by dividing 936 by 36. This gives us 26 workers. However, we also know that there were 108 overtime hours worked. Since each overtime hour is worked by one worker, we subtract the number of overtime hours from the total number of basic hours worked (936 - 108) to find the number of workers who worked last week, which is 828. Since each worker worked at least their basic 36 hours, we divide 828 by 36 to get the number of workers, which is approximately 23. Therefore, the answer is 23.

Explanation

Last week, the total number of hours worked by all the workers was 936. Since each worker worked at least their basic 36 hours, we can calculate the total number of basic hours worked by dividing 936 by 36. This gives us 26 workers. However, we also know that there were 108 overtime hours worked. Since each overtime hour is worked by one worker, we subtract the number of overtime hours from the total number of basic hours worked (936 - 108) to find the number of workers who worked last week, which is 828. Since each worker worked at least their basic 36 hours, we divide 828 by 36 to get the number of workers, which is approximately 23. Therefore, the answer is 23.

26. The total direct labor charge for the above was:

$810

$5133.60

$5803.2

$6210

The total direct labor charge for the given scenario is $5803.2. This amount is calculated by adding up the direct labor charges for all the relevant activities or tasks. It is important to note that direct labor charges include the cost of wages, benefits, and other expenses directly associated with the employees who directly contribute to the production or provision of a service.

Explanation

The total direct labor charge for the given scenario is $5803.2. This amount is calculated by adding up the direct labor charges for all the relevant activities or tasks. It is important to note that direct labor charges include the cost of wages, benefits, and other expenses directly associated with the employees who directly contribute to the production or provision of a service.

27. A job is budgeted to require 3,300 productive hours but will incur 25% idle time. If the total labor cost budgeted for the job is $36,300, what is the labor cost per hour (to the nearest cent)?

Total hours worked, and paid = 3,300/0.75 = 4,400 hours
Hourly rate = $36,300/4,400 = $8.25

Explanation

Total hours worked, and paid = 3,300/0.75 = 4,400 hours
Hourly rate = $36,300/4,400 = $8.25

Submit

28. D Ltd operates a total absorption costing system. Budgeted fixed overheads for 2007 were $175,000 and budgeted production was 5,000 units. During 2007, the actual fixed overheads amounted to $186,000 and actual production was 6,000 units. Overheads have been:

Under-absorbed by $24000

Under absorbed by $11000

Over absorbed by $11000

Over absorbed by $24000

The budgeted fixed overheads for 2007 were $175,000, but the actual fixed overheads amounted to $186,000. This means that the actual fixed overheads exceeded the budgeted amount, resulting in an over absorption of $11,000. Additionally, the budgeted production was 5,000 units, but the actual production was 6,000 units. This increase in production would have further increased the fixed overheads, resulting in an additional over absorption of $24,000. Therefore, the correct answer is that the overheads have been over absorbed by $24,000.

Explanation

The budgeted fixed overheads for 2007 were $175,000, but the actual fixed overheads amounted to $186,000. This means that the actual fixed overheads exceeded the budgeted amount, resulting in an over absorption of $11,000. Additionally, the budgeted production was 5,000 units, but the actual production was 6,000 units. This increase in production would have further increased the fixed overheads, resulting in an additional over absorption of $24,000. Therefore, the correct answer is that the overheads have been over absorbed by $24,000.

29. A company makes two products, Reds and Blues. Total fixed overheads to absorb
during May are $60,000. Budgeted production levels for Reds for May are 10,000
units. Twice as many Blues as Reds are to be produced. Each Red takes 1 hour of
labour and each Blue takes 0.25 hours. Overheads are to be absorbed on a labour
hour basis.
What is the overhead absorption rate for each finished Blue

The overhead absorption rate for each finished Blue is $1. This means that for every finished Blue product, $1 of overhead costs will be allocated or absorbed. This rate is determined by dividing the total fixed overheads ($60,000) by the total labor hours required to produce the Blues. Since each Blue takes 0.25 hours of labor, the total labor hours for Blues would be twice the labor hours for Reds (10,000 units * 1 hour for Reds * 2 = 20,000 hours). Dividing $60,000 by 20,000 hours gives us the overhead absorption rate of $1 per finished Blue.

Explanation

The overhead absorption rate for each finished Blue is $1. This means that for every finished Blue product, $1 of overhead costs will be allocated or absorbed. This rate is determined by dividing the total fixed overheads ($60,000) by the total labor hours required to produce the Blues. Since each Blue takes 0.25 hours of labor, the total labor hours for Blues would be twice the labor hours for Reds (10,000 units * 1 hour for Reds * 2 = 20,000 hours). Dividing $60,000 by 20,000 hours gives us the overhead absorption rate of $1 per finished Blue.

Submit

30. A company uses an overhead absorption rate of $24 per machine hour which was calculated using 80,000 budgeted machine hours for the period. During the same period actual total overhead expenditure was $2,100,000 and 84,000 machine hours were recorded on actual production. By how much was the total overhead under or over absorbed in the period?

$80,000 over absorbed

$84000 under absorbed

$80000 under absorbed

$96000 over absorbed

During the period, the company budgeted for 80,000 machine hours and calculated an overhead absorption rate of $24 per machine hour. However, the actual production recorded 84,000 machine hours. This means that the company used more machine hours than initially budgeted. As a result, the total overhead absorbed based on the budgeted machine hours was less than the actual total overhead expenditure of $2,100,000. Therefore, the total overhead was under-absorbed by $80,000.

Explanation

During the period, the company budgeted for 80,000 machine hours and calculated an overhead absorption rate of $24 per machine hour. However, the actual production recorded 84,000 machine hours. This means that the company used more machine hours than initially budgeted. As a result, the total overhead absorbed based on the budgeted machine hours was less than the actual total overhead expenditure of $2,100,000. Therefore, the total overhead was under-absorbed by $80,000.

F2 Assessment 2