a furniture making business manufactures quality furniture to customers order 610008

Overhead analysis and calculation of product costs

A furniture-making business manufactures quality furniture to customers’ order. It has three production departments and two service departments.

Budgeted overhead costs for the coming year are as follows:

The three production department – A, B and C, and the two service department – X and Y, are housed in the new premises, the details of which, together with other statistics and information, are gives below.

Required:

(a) Prepare a statement showing the overhead cost budgeted for each department, showing the basis of apportionment used. Also calculate suitable overhead absorption rates.

(b) Two pieces of furniture are to be manufactured for customers. Direct costs are as follows:

Calculate the total costs of each job.

(c) If the firm quotes prices to customers that reflect a required profit of 25% on selling price. Calculate the quoted selling price for each job.

(d) If material costs are a significant past of total costs in a manufacturing company, describe a system of material control that might be used in order to effectively control costs, paying particular attention to the stock control aspect.