The Xiang plant has overhead cost amounting to £75,000. The plant currently appl

Question

The Xiang plant has overhead cost amounting to £75,000. The plant currently applies overhead using direct labour hours and expected capacity of 50,000 direct labour hours. The following data have been assembled for use in developing a bid for a proposed job: Direct materials £500; Direct labour £2,000; Machine hours 500; Number of inspections 4; Direct labour hours 800. Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500. Using machine hours to assign overhead, the total cost of the potential job would be Select one: a. £4,100 b. £3,900 c. £3,400 d. £4,000 e. Cannot be determined.

Explanation / Answer

Solution:- d 4,000

Explanation:-

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Particulars Amount Calculation Direct material 500 Direct labour 2,000 Overhead 1,500 (75,000 / 25,000) * 500 Total cost 4,000

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