A highly automated process is used to make tins of paint. It has a budgeted overhead of £40,000, taking 1,250 machine hours and 500 direct labour hours. Each can of paint uses £12 of direct materials, 0.1 labour hours at £4 per hour and 0.2 machine hours. The most appropriate calculation of the total cost of each tin of paint would be:
A) £15.60
B) £28.40
C) £18.80
D) £20.40

Question

Quizplus · Accepted Answer

The total cost per tin includes direct materials (£12), direct labor (0.1 hours x £4 = £0.40), and overheads allocated based on machine hours. Overhead rate per machine hour is £40,000 / 1,250 = £32. Each tin uses 0.2 machine hours, so overhead cost per tin is 0.2 x £32 = £6.40. Total cost per tin = £12 + £0.40 + £6.40 = £18.80.

A Highly Automated Process Is Used to Make Tins of Paint