CAF-5 · Chapter 17 · Question 16 of 20
(Job Costing & Absorption) A specific job incurs prime costs of Rs. 60,000. It requires 500 direct labour hours in Department A and 300 machine hours in Department B. Department A absorbs overheads at Rs. 25 per labour hour, and Department B absorbs overheads at Rs. 40 per machine hour. Administrative overheads are strictly absorbed at 20% of the total factory (production) cost. What is the total cost of the job?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 101,400
Explanation
Prime Cost = Rs. 60,000. Absorbed Overheads Dept A = 500 * 25 = Rs. 12,500. Absorbed Overheads Dept B = 300 * 40 = Rs. 12,000. Total Factory Cost = 60,000 + 12,500 + 12,000 = Rs. 84,500. Administrative Overheads = 20% of 84,500 = Rs. 16,900. Total Job Cost = 84,500 + 16,900 = Rs. 101,400.
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