{"id":107,"date":"2021-03-22T11:16:00","date_gmt":"2021-03-22T11:16:00","guid":{"rendered":"https:\/\/www.thetrainingplace.org\/blog\/2021\/03\/22\/overhead-absorption-rate\/"},"modified":"2024-11-22T13:08:16","modified_gmt":"2024-11-22T13:08:16","slug":"overhead-absorption-rate","status":"publish","type":"post","link":"https:\/\/www.thetrainingplace.org\/blog\/2021\/03\/overhead-absorption-rate\/","title":{"rendered":"Overhead absorption rate"},"content":{"rendered":"

 <\/p>\n

OVERHEAD ABSORPTION RATE<\/span><\/b><\/p>\n

JTM Ltd is looking to calculate the unit cost for one of its products. It needs to calculate an overhead absorption rate to apply to each unit. The methods it is considering are:<\/span><\/p>\n

\u00b7 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/span><\/span>direct labour hours<\/span><\/p>\n

\u00b7 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/span><\/span>machine hours<\/span><\/p>\n

\u00a0<\/span>The factory activity forecast is as below:<\/span><\/p>\n\n\n\n\n\n
Machine
\nhours<\/span><\/td>\n		15,000
\nhrs<\/span><\/td>\n<\/tr>\n
Labour
\nhours<\/span><\/td>\n		21,000
\nhrs<\/span><\/td>\n<\/tr>\n
Overheads<\/span><\/td>\n\u00a3672,000<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span>(i) Complete the table below to show the possible overhead
\nabsorption rates that JTM Ltd could use. <\/span><\/p>\n\n\n\n\n\n\n
\u00a0<\/span><\/td>\n\n

Machine hour<\/span><\/b><\/p>\n<\/td>\n

\n

Labour hour<\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

Overheads
\n(\u00a3)<\/span><\/td>\n		\u00a0<\/span><\/td>\n\u00a0<\/span><\/td>\n<\/tr>\n
Activity<\/span><\/td>\n\u00a0<\/span><\/td>\n\u00a0<\/span><\/td>\n<\/tr>\n
Absorption
\nrate (\u00a3)<\/span><\/td>\n		\u00a0<\/span><\/td>\n\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Answer:<\/span><\/p>\n\n\n\n\n\n\n
\u00a0<\/span><\/td>\n\n

Machine hour<\/span><\/b><\/p>\n<\/td>\n

\n

Labour hour<\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

Overheads
\n(\u00a3)<\/span><\/td>\n		\n

672,000<\/span><\/p>\n<\/td>\n

\n

672,000<\/span><\/p>\n<\/td>\n<\/tr>\n

Activity<\/span><\/td>\n\n

15,000 hrs<\/span><\/p>\n<\/td>\n

\n

21,000 hrs<\/span><\/p>\n<\/td>\n<\/tr>\n

Absorption
\nrate (\u00a3)<\/span><\/td>\n		\n

44.80<\/span><\/p>\n<\/td>\n

\n

32.00<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

  OVERHEAD ABSORPTION RATE JTM Ltd is looking to calculate the unit cost for one of its products. It needs to calculate an overhead absorption rate to apply to each unit. The methods it is considering are: \u00b7 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0direct labour hours \u00b7 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0machine hours \u00a0The factory activity forecast is as below: Machine hours 15,000 hrs … Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-107","post","type-post","status-publish","format-standard","hentry","category-uncategorised"],"yoast_head":"\nOverhead absorption rate - The Training Place Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thetrainingplace.org\/blog\/2021\/03\/overhead-absorption-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Overhead absorption rate - The Training Place Blog\" \/>\n<meta property=\"og:description\" content=\"  OVERHEAD ABSORPTION RATE JTM Ltd is looking to calculate the unit cost for one of its products. It needs to calculate an overhead absorption rate to apply to each unit. The methods it is considering are: \u00b7 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0direct labour hours \u00b7 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0machine hours \u00a0The factory activity forecast is as below: Machine hours 15,000 hrs ... 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