Page 476 - F2 - MA Integrated Workbook STUDENT 2018-19

Chapter 18

Example 6

For every machine hour a unit uses in production cost centre 1 it will pick up
$5.44 and for every labour hour a unit uses in production cost centre 2, it will
pick up $10.30.

Consider the following data for product XX:

Prod cost centre 1 Prod cost centre 2

Labour hours per unit 5 3
Machine hours per unit 2 4

The overhead one unit of product XX will pick up is:

Production cost centre 1: 2 machine hours × $5.44 = $10.88

Production cost centre 2: 3 labour hours × $10.30 = $30.90

Remember: this is the overhead, or indirect cost, to be picked up by
each unit of XX. To find the total cost of a unit of XX the direct costs
must be added on.

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