Q4

YSL – ALLOCATION OF OH

ANSWER

Allocation of Overhead Cost

COST Allocation A B C
$ Base $ $ $
4 7,20
Set up costs 90,000 No. of set up 36,000 6,800 0
No. of 1 2,72
Receiving 30,000 deliveries 13,636 3,636 7
5,00
Despatch 15,000 No. of order 5,000 5,000 0
1 18,33
Machining 55,000 Machine hours 18,333 8,333 3
Overhed as per 8 33,26
department 72,970 3,770 1
2 20,0
Units of Production 20,000 5,000 00

Overhead cost per

unit 3.65 3.35 1.66
Material cost (per
unit) 5 10 10
Labour cost (per
hour) 5 10 5 5
Production cost (per
unit) 18.65 18.35 16.66

Sales price (per unit) 20 20 20

(-) Production cost 18.65 18.35 16.66
Gross profit (per
unit) 1.35 1.65 3.34