Question

Use the following information to answer questions 37 to 39:

ADCITED is a business that specialises in making signs for their customers. Each sign is different, so ADCITED uses a job costing system.

ADCITED uses predetermined overhead recovery rates to apply overheads (indirect costs) to jobs. ADCITED segments overheads into ‘general’ overheads, which are applied on a direct labour hours basis, and ‘machine-related’ overheads, which are applied on a machine hours basis.

ADCITED uses cost-plus pricing, with 30% mark-up applied to the full cost of each job.

The following annual figures are budgeted for ADCITED:

General overheads $68,400

Machine-related overheads $36,000

Direct labour costs $114,000

Direct labour hours 3,800

Machine hours 1,200

A customer asks ADCITED to quote a job for them, to make all the signs for their new store.

ADCITED estimates the following for the quote:

Direct materials used $9,400

Direct labour hours used 20

Machine hours used 6

Calculate the overhead recovery rates for ADCITED. Show your workings.

Calculate the full cost of the job being quoted. Show your workings.

What price should ADCITED quote to their customer for the job? Give your answer to the nearest whole dollar (0 d.p.)

Answer 1