Question I
8. Company A has fixed expenses of 515.000 per year and each unit of product has a $0.002 variable cost. Company B has fixed expenses of $5000 per year and can produce the same product at a 50.05
variable cost At what number of units of annual production will Company A have the same overall cost as Company B?
Question 2
5. The welding department of a mining equipment manufacturing plant consists of four cost centres: manual arc welding (A). semi-automatic welding (B). furnace brazing and heat treating (C). and
nnishing (0). Some oxyacetylene cutting is also done in Centre B. Assume that it is possible to allocate departmental overhead expenses directly to each cost centre, and that the following data for
the welding department were compiled last year by the accounting system.
Cost Centre Departmental Expenses Direct Labour Direct Material Hours Cost A 521.000 10.000 575.000 512.000 B 10.000 4,000 18.000 12.000 C 5.400 1 500 9.000 4.500 D 4,800 2,800 11,200 3,000
Compute the overhead rate applicable for Cost Centre A by the following methods: a) Percentage of direct labour cost b) Percentage of prime cost c) Rate per direct labour hour