Accounting 9706 · AS & A Level · Traditional costing methods

Traditional costing methods — practice question

Bruna Limited is a manufacturing firm. It runs three production departments and two service departments.
(a)[13]

Calculate, to two decimal places, an appropriate overhead absorption rate for each of the three production departments.

(b)[7]

Calculate the overall price to quote to the customer.

(c)[4]

Advise the directors whether or not they should make this change. Justify your answer.

(d)[6]

Explain how over absorption and under absorption of overheads can affect the profit of a manufacturing business.

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