Question

Wagner Ltd provides a repair and maintenance service for commercial computer networks. A repair for a...

Wagner Ltd provides a repair and maintenance service for commercial computer networks. A repair for a particular network required direct materials costing pound 3740. Direct labour worked on the repair was 18 hours and the wage rate for labour is pound 27.00an hour. The business incurs overheads of pound 118000 each month. During each month 4 500 direct labour hours are worked and charged to cost units​ (jobs carried out by the​ business). The business charges overheads to jobs on a direct labour hour basis.

What is the full​ (absorption) cost of the​ job?

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Answer #1

Overhead cost per hour = Total Overheads per month/Total labor hours per month

= 118,000/4,500 hrs = 26.22 per hour

Calculation of Full (absorption) cost of the job (Amounts in )

Direct materials cost 3,740
Direct labor cost (18 hrs*27 per hour) 486
Overhead Charged (18 hrs*26.22 per hour) 472
Total full cost of the job 4,698

Therefore the total full cost of the job is 4,698.

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