Question Solved1 Answer Anderson Ltd absorbs overheads on a direct labour hours basis, the following information is available: Total budgeted manufacturing overhead: £299,250 Direct materials consumption per unit: 1.5kg Material price per kg: £3.00 Direct labour hours per unit: 3 1/2 Labour cost per hour: £7.50 Total budgeted production level: 9,000 units What is the indirect overhead absorption rate on the basis that Anderson currently adopts? £9.50 per labour hour £9.25 per labour hour £9.00 per labour hour £10.50 per labour hour

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Transcribed Image Text: Anderson Ltd absorbs overheads on a direct labour hours basis, the following information is available: Total budgeted manufacturing overhead: £299,250 Direct materials consumption per unit: 1.5kg Material price per kg: £3.00 Direct labour hours per unit: 3 1/2 Labour cost per hour: £7.50 Total budgeted production level: 9,000 units What is the indirect overhead absorption rate on the basis that Anderson currently adopts? £9.50 per labour hour £9.25 per labour hour £9.00 per labour hour £10.50 per labour hour
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Transcribed Image Text: Anderson Ltd absorbs overheads on a direct labour hours basis, the following information is available: Total budgeted manufacturing overhead: £299,250 Direct materials consumption per unit: 1.5kg Material price per kg: £3.00 Direct labour hours per unit: 3 1/2 Labour cost per hour: £7.50 Total budgeted production level: 9,000 units What is the indirect overhead absorption rate on the basis that Anderson currently adopts? £9.50 per labour hour £9.25 per labour hour £9.00 per labour hour £10.50 per labour hour
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Answer Option A is correct. Overhead absorption rate = budgeted overhead / budgeted labour cost = 299250 ÷ (3.5*7.5*9000) = ... See the full answer