Absorption Costing Rocket Ltd a small jobbing company, has the following budgeted figures for the coming year: Direct Materials €264,000 Direct Wages €675,000 Factory Overheads €97,500 For the coming year the company has also budgeted 10,000 labour hours and 12,500 machine hours - Leaving Cert Accounting - Question 8 - 2009

To calculate the overhead absorption rate per machine hour, use the formula:

Substituting the values:

Thus, the overhead absorption rate per machine hour is €7.80.

To calculate the total cost of Job Number 591:

1. Direct Materials: €9,000

2. Direct Labour Cost:

   The direct labour hours are 180. Using the overhead absorption rate per direct labour hour:

   $$ext{Direct Labour Cost} = 180 \text{ hours} \times €7.50\text{/hr} = €1,350$$

3. Factory Overheads:

   Using the machine hours of 220:

   $$ext{Factory Overheads} = 220 \text{ hours} \times €7.80\text{/hr} = €1,716$$

4. Total Cost:

   $$ext{Total Cost} = €9,000 + €1,350 + €1,716 = €12,066$$

Therefore, the total cost of Job Number 591 using the overhead absorption rate per machine hour is €12,066.

To calculate the total cost of Job Number 591 using the overhead absorption rate per direct labour hour, follow these steps:

1. Direct Materials: €9,000

2. Direct Labour Cost:

   Using the direct labour hours:

   $$ext{Direct Labour Cost} = 180 \text{ hours} \times €9.75\text{/hr} = €1,755$$

3. Factory Overheads:

   Using the factory overheads:

   $$ext{Factory Overheads} = 180 \text{ hours} \times €9.75\text{/hr} = €1,755$$

4. Total Cost:

   $$ext{Total Cost} = €9,000 + €1,755 + €1,755 = €12,105$$

Thus, the total cost of Job Number 591 using the overhead absorption rate per direct labour hour is €12,105.

To calculate the selling price:

1. Cost from Machine Hour Rate: €12,066

2. Cost from Labour Hour Rate: €12,105

3. Average Cost:

   $$ext{Average Cost} = (12,066 + 12,105) / 2 = €12,085.50$$

4. Markup: 20% on cost:

   $$ext{Markup} = 20\% \times 12,085.50 = €2,417.10$$

5. Selling Price:

   $$ext{Selling Price} = 12,085.50 + 2,417.10 = €14,502.60$$

Therefore, the selling price of Job Number 591 to the customer is €14,502.60.