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A business operates a job costing system and has the aim of making a net profit of 30% on sales.

+2 Votes
A business operates a job costing system and has the aim of making a net profit of 30% on sales.

The cost estimates for one particular job are as follows:

Direct materials 80 kg at $5 per kg

Direct labour 40 Hours at $6 per hour

The total overheads are budgeted at $120,000 and are absorbed on the basis of direct labour hours. The budgeted labour hours are 50,000.

What price should be quoted for this job (to the nearest $)?

May 2nd 2014 AN ACCA USER 340 Points

5 Replies

+1 Vote
overhead absorbtion rate = 120000/(500006)
= .4
Should be
overhead absorbtion rate = 120000/(50000)
= 2.4
Isn't it?
May 15th 2014 AN ACCA USER 8,730 Points
+1 Vote
Total cost = 400+240+96 = 736
May 24th 2014 AN ACCA USER 380 Points
0 Votes

material cost = 80 x 5 = 400
direct labour cost = 40 x 6= 240
fixed overhead cost = 120,000/ 50,000 x 40 =96
total cost =736

since profit is 30% of sales price:
Assuming S is sales price
((S-736)/S) x 100% = 30%

S-736=0.3S
Hence S = 1051.43

May 24th 2014 AN ACCA USER 380 Points
–1 Vote

overhead absorbtion rate = 120000/(500006)
= .4
cost card
d material 400
d labour 240
standard direct cost 640
fixed overhead ( 40
.4 ) 16
full cost of production 656
profit ( on sales 30% ) 656* (100 / 70 ) = 281.14
sales price = 937

May 5th 2014 AN ACCA USER 260 Points
–1 Vote

material 80 x 5 = 400
direct labour = 40 x 6= 240
fixed overhead= 120,000/ 50,000 x 40 =96
total cost =796

on 30% margin means ...796/70 x 100 = 1052.42

May 10th 2014 AN ACCA USER 1,610 Points
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