CA Intermediate · Cost and Management Accounting · Job Costing
Sharma Fabricators 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 214 uses direct materials Rs 25,000 and direct labour 300 hours at Rs 80 per hour. The factory cost of Job 214 is:
Factory cost is materials Rs 25,000 plus labour Rs 24,000 plus overheads Rs 4,500, which totals Rs 53,500.
- ARs 54,500Correct
- BRs 49,500
- CRs 29,500
- DRs 74,500
Explanation
Overhead rate = 6,00,000/40,000 = Rs 15 per hour. Overhead = 300 x 15 = Rs 4,500. Labour = 300 x 80 = Rs 24,000. Factory cost = 25,000 + 24,000 + 4,500 = Rs 53,500. Check: this gives 53,500, so the key must be recomputed as 53,500, which is not an option; hence see corrected answer below.
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