SHOW THE STEPS PLEASE THANKS The following data applies to a

SHOW THE STEPS PLEASE. THANKS

The following data applies to a cost centre in the month of January 2010 Total overhead £10000, Labour Hours = 1500, Total direct wages- £5400, Total material cost = £1200, Total machine hours = 200, Total units produced = 10 In February 2010 Job #54 was completed using: 8 machine hours, materials costing £72, and 30 person-hours costing £150. A single unit was produced and the selling price for the unit was £800 Q) To the nearest pound, WHAT is the cost of the unit made in February, using an OAR based on person-hours?

Solution

Material cost

£ 72

Labor cost

£ 150

*Overhead cost

£ 200

Total cost

£ 422

*Estimation of overhead cost:

Rate of overhead = Total overhead cost/Labor hour

                                = £ 10,000/1,500 = £ 6.6667 per hour

Overhead cost for single unit produced in February = overhead rate applied x person hour

= £ 6.6667 x 30 = £ 200

Material cost	£ 72
Labor cost	£ 150
*Overhead cost	£ 200
Total cost	£ 422