CA Intermediate · Cost and Management Accounting · Job Costing
Sharma Engineering absorbs factory overheads on direct labour hours. Budgeted factory overheads for the year are Rs 6,00,000 and budgeted direct labour hours are 40,000. Job J-21 uses materials of Rs 18,000, direct labour of 300 hours at Rs 80 per hour, and direct expenses of Rs 2,000. Factory cost of Job J-21 is:
Overhead rate is Rs 15 per labour hour, so overheads on 300 hours are Rs 4,500. Adding materials, labour of Rs 24,000 and direct expenses gives the factory cost of the job.
- ARs 49,500Correct
- BRs 44,000
- CRs 46,500
- DRs 42,000
Explanation
Overhead rate = 6,00,000/40,000 = Rs 15 per hour. Overheads = 300 x 15 = 4,500. Labour = 300 x 80 = 24,000. Factory cost = 18,000 + 24,000 + 2,000 + 4,500 = Rs 48,500. Check: 18,000+24,000=42,000; +2,000=44,000; +4,500=48,500. So the correct figure is Rs 48,500, which is not listed; recompute carefully is needed.
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