Co=$16

In each three-month period, the usage of the item is 10,000 units => Annual demand for 12
months = 10,000 * 4 = 40,000 units
Ch =$40*5% = $2

EOQ=
√ 2 ×Co × D
Ch
=
√2×16 × 40,000
2
=800(units)

2.

Ch = 12 * 0.5 = 6

EOQ =
√ 2∗Co∗D
Ch
=
√
2∗25.35∗2,000
6
=¿ 130 units

3.

Actual cost: $42,000

Absorbed cost: 18,000 * $2.20 = $39,600
Under absorbed by = Actual cost - Absorbed cost
= $42,000 - $39,600 = $2,400
4.

The total employed end of the year = 200 – 60 + 15 = 155

200+155
Average no of employees in period = = 177,5
2
 Replacement 15
The labour turnover rate = = ×100 % = 8,45%
Average no of employees∈ period 177 ,5

5. Spaced Out Co has two production departments (F and G) and two service departments
(Canteen and Maintenance). Total allocated and apportioned general overheads for each
department are as follows.
F G Canteen Maintenance
$125,000 $90,000 $10,000 $50,000
Canteen and Maintenance perform services for both production departments and Canteen also
provides services for Maintenance in the following proportions.
F G Canteen Maintenance
% of Canteen to 60 25 – 15
% of Maintenance to 65 35 – –
What would be the total overheads for production department G once the service department
costs have been apportioned?

Canteen = $10,000

15
Maintenance =50,000 + * 10,000 = $51,500
100

25 35
Department G = 90,000 + Canteen + Maintenance
100 100

25 35
= 90,000 + * 10,000 + * 51,500 = $110,525
100 100

6. The following data relate to work in the finishing department of a certain factory.
Normal working day 8 hours
Basic rate of pay per hour $10
Standard time allowed to produce 1 unit 3 minutes
Premium bonus payable at the basic rate 70% of time saved
On a particular day one employee finishes 240 units. What is his gross pay for the day?

7. A company has over-absorbed fixed production overheads for the period by $4,000. The
fixed production overhead absorption rate was $6 per unit and is based on the normal level of
activity of 3,000 units. Actual production was 2,800 units.
What was the actual fixed production overheads incurred for the period?

Absorption = OAR * Actual level

= 6 * 2,800 = 16,800
= > Actual fixed production = Absorption cost - Over-absorbed
= 16,800 – 4,000 = 12,800

8. An employee is paid on a piecework basis. The basis of the piecework scheme is as

follows:
1 to 100 units – $0.30 per unit
101 to 200 units – $0.40 per unit
201 to 350 units – $0.50 per unit
with only the additional units qualifying for the higher rates. Rejected units do not qualify for
payment. During a particular day the employee produced 325 units of which 30 were rejected
as faulty. What did the employee earn for their day's work?

The following information relates to questions 9 and 10.

A company has the following actual and budgeted data for year 4.
Budget Actual
Production 5,000 units 4,000 units
Variable production overhead per unit $2.5 $2.5
Fixed production overheads $250,000 $230,000
Sales 4,500 units 3,800 units
Overheads are absorbed using a rate per unit, based on budgeted output and expenditure.
9. What was the fixed production overhead absorbed amount during year 4?

The budgeted fixed production overheads are $250,000 and the budgeted production is 5,000
units, so the fixed production overhead absorption rate is:
250,000
OAR= =50 $/unit
5,000
Fixed production overhead absorbed = OAR*Actual level
= 50 * 4,000
= 200,000
The fixed production overhead absorbed amount during year 4 was $200,000.

10. By how much was the fixed production overhead under or over-absorbed?

Actual cost: $230,000

Absorbed cost: $200,000.
Under absorbed. 230,000 – 200,000 = 30,000