Question

Name any methods of absorption of production overheads with their formulas?

Answer 1

a) Direct material cost percentage rate = Total overheads/Direct material cost *100 

b) Direct labour cost percentage rate = Total overheads/Direct labour cost *100

c) Prime cost percentage rate = Total overheads/Prime cost *100 

d) Direct labour hour rate = Productionoverheads/Direct labour hours 

e) Machine hour rate = Total overheads/No. Of machine hours 

f) Rate per unit of output = Total overheads/No. Of units produced