Europa Ltd, a manufacturing company has two Production Departments, Department A and Department B and one Service Department, Department X - Leaving Cert Accounting - Question 8 - 2013

The total overhead costs absorbed can be calculated as follows:

• Total for Department A: $80,000 + 18,000 = 98,000$

• Total for Department B: $60,000 + 6,000 = 66,000$

The overhead absorption rate for Department A is calculated by dividing the overheads by the budgeted machine hours:

• Overhead Rate for Department A: $ext{Overhead Absorption Rate} = \frac{98,000}{2,500} = 39.20 \text{ per machine hour}$

The overhead absorption rate for Department B can be calculated as follows:

• First, calculate the budgeted overheads: $66,000$

• Then, divide by the budgeted labour hours: $ext{Overhead Absorption Rate} = \frac{66,000}{1,200} = 55.00 \text{ per labour hour}$

To calculate the total cost of Job No. 1869, sum the direct materials, direct labour, and allocated overheads:

• Direct Materials: €1,850

• Direct Labour: €930

• Overhead for Department A: $4 ext{ hours} \times 39.20 = 156.80$

• Overhead for Department B: $5 ext{ hours} \times 55.00 = 275.00$

• Total Cost: $1,850 + 930 + 156.80 + 275.00 = 3,351.80$

To find the selling price, first calculate the markup on the total cost:

• Markup: $3,351.80 \times 0.25 = 838.95$

• Selling Price: $3,351.80 + 838.95 = 4,190.75$