Budgeted information for the year after overhead costs have been apportioned to the relevant production departments:
Department Overheads Labour Hours Machine Hours
A1 £2,025,000 270,000
B1 £1,984,500 405,000 63,000
The following information relates to overhead costs;
(a) Within each department, Production Overheads are absorbed on the following bases:
Department A1 – labour hours
Department B1 – machine hours
(b) Administration overheads are 12% of Prime Cost
(c) Selling and Distribution Overheads are 11% of Production Cost
The company has received an order for a job – reference number A/3004
(i) The job will require two types of Direct Materials:
35kg of material P @ £12/kg
40 kg of material Q @ £25/kg
(ii) The job will require the following Direct Labour:
Department A1 – 30 hours @ £12 per hour
Department B1 – 19 hours @ £20 per hour
(iii) In Department B1, the order will require 10 hours of machine time
(iv) For this job, Bissett Ltd will have to hire a special machine for two months. The cost to hire the machine is £800 for four months. The minimum time the machine can be hired for is four months.
(v) The company requires a profit mark up of 10% on this job
Required:
(a) Prepare an Operating Statement for the job, using the above information, showing clearly Total Cost, Profit and Selling Price.
Outcome 2
A large and important customer, Neilanplc, has approached BissettLtd and offered Bissett Ltd £4,700 per unit to buy 50 extra units of product XYZ.
The management of Bissett Ltd is considering this order, especially as tightening market conditions mean that if Bissett Ltd are to remain
