- 1 Marks
Question
The following data were extracted from the records of ABCYZ Limited in respect of its product YZ:
The absorption rate using Direct Labour is
A. N2.00
B. N8.00
C. N12.00
D. N24.00
E. N40.00
Answer
Answer:
B. N8.00
Explanation:
The absorption rate is calculated using the formula:
Absorption Rate = Total Overhead Cost/Total Direct Labour Hours
Given the data, the total overhead cost and total direct labour hours can be used to find the rate per hour. Based on the calculations, the absorption rate comes out to be N8.00 per direct labour hour. This means for every direct labour hour worked, N8.00 is allocated as the overhead cost to product YZ.
- Tags: Absorption Rate, Costing, Direct Labour, Overhead Allocation
- Level: Level 1
- Topic: Costing Methods
- Series: MAY 2016
- Uploader: Joseph