The manufacturing plant at Daydream plc has three departments.The budgets for each department are shown below:
$$\begin{array} { l c c c }
& \text { A } & \text { B } & \text { C } \
\text { Production Overheads } & £ 3 \mathrm {~m} & £ 6 \mathrm {~m} & £ 30 \mathrm {~m} \
\text { Hours worked } & 1 \mathrm {~m} & 1 \mathrm {~m} & 1 \mathrm {~m} \
\text { Direct wages } & £ 12 \mathrm {~m} & £ 16 \mathrm {~m} & £ 20 \mathrm {~m}
\end{array}$$
If product ABC takes 20 direct labour hours (10 hours department A,5 hours department B and 5 hours from department C),calculate the production overhead for product ABC using the production overhead rate.

Question

The manufacturing plant at Daydream plc has three departments.The budgets for each department are shown below:
$$\begin{array} { l c c c } 
& \text { A } & \text { B } & \text { C } \
\text { Production Overheads } & £ 3 \mathrm {~m} & £ 6 \mathrm {~m} & £ 30 \mathrm {~m} \
\text { Hours worked } & 1 \mathrm {~m} & 1 \mathrm {~m} & 1 \mathrm {~m} \
\text { Direct wages } & £ 12 \mathrm {~m} & £ 16 \mathrm {~m} & £ 20 \mathrm {~m}
\end{array}$$
If product ABC takes 20 direct labour hours (10 hours department A,5 hours department B and 5 hours from department C),calculate the production overhead for product ABC using the production overhead rate.

Quizplus · Accepted Answer

First, calculate the production overhead rate for each department: Department A: £3m / 1m hours = £3 per hour Department B: £6m / 1m hours = £6 per hour Department C: £30m / 1m hours = £30 per hour Then, calculate the production overhead for product ABC: (10 hours * £3) + (5 hours * £6) + (5 hours * £30) = £30 + £30 + £150 = £210. Since product ABC takes 20 hours in total, the production overhead rate per hour is £210 / 20 hours = £10.5 per hour. However, there seems to be a mistake in my calculation as none of the options match. Let's correct the approach: The correct calculation for the production overhead for product ABC should consider the total overheads allocated based on the hours spent in each department, not the rate per hour directly. The mistake was in the interpretation of the final step. The correct approach involves calculating the total overhead cost for the product and then dividing by the total hours if necessary, but the question asks for the total overhead, not the rate. Given the provided options, it seems there was a misunderstanding in the calculation process, as the options suggest a total cost rather than a rate per hour. The correct answer should be based on the total overhead costs allocated from each department to product ABC, which was initially calculated as £210 in total, not per hour. This indicates a mistake in the explanation, as the question's phrasing and the answer options do not align with the calculation provided.

The Manufacturing Plant at Daydream Plc Has Three Departments If Product ABC Takes 20 Direct Labour Hours (10 Hours