A Level Accounting (9706)•9706/12/M/J/19
Explanation
Overhead absorption rate using labour hours for assembly department Steps:
- Identify budgeted overheads allocated to assembly department: $75,000.
- Identify absorption base for assembly: labour hours (5,600 budgeted).
- Divide overheads by labour hours: 13.39 per labour hour.
- Confirm rate applies specifically to assembly department.
Why A is correct:
- Overhead absorption rate formula is departmental budgeted overheads divided by budgeted labour hours, yielding $13.39 per labour hour for assembly.
Why the others are wrong:
- B uses machine hours base incorrectly for assembly, leading to wrong rate.
- C miscalculates division, overestimating rate at $22.50 per labour hour.
- D applies high rate to machine hours, confusing it with machinery department base.
Final answer: A
Topic: Traditional costing methods
Practice more A Level Accounting (9706) questions on mMCQ.me