Question

BENMAYER Enterprise produces liquid and compound fertilizers. The following is the manufacturing costs related to 1,000 bottles of liquid fertilizers and 150 packs of compound fertilizers produced during the month of June 2019.

Types of cost	Liquid fertilizers	Compound fertilizers
Direct materials	RM50,000	RM60,000
Direct labour	RM10,000	RM5,000
Direct labour	1,000 hours	500 hours

The estimated monthly overhead cost is RM30,000 and the business uses plantwide overhead rate based on direct labour hours in allocating the overhead cost.

Required:

(a) Calculate the predetermined plantwide overhead rate.

(b) Calculate the applied overhead costs of each product.

(c) Calculate the total manufacturing cost of each product.

Answer 1

a) Predetermined plantwide overhead rate = monthly overhead cost / Total labour hrs

= 30,000 / (1000+500)

= RM 20 per labour hr

b) Applied overhead cost

	Liquid fertilizers	Compound fertilizers
Units	1,000	150
Labour hrs	1,000	500
Labour hr per unit	1	3
Predetermined rate	20	20
Applied cost per units	20	67
Total Applied cost	20,000	10,000

c)

	Liquid fertilizers	Compound fertilizers
Units	1,000	150
Direct material	50,000	60,000
Labour cost	10,000	5,000
Applied cost	20,000	10,000
Total manufacturing cost	80,000	75,000