Equator Garments Ltd is manufacturer of custom-made suits tailored to the requirements of each… 1 answer below »

Equator Garments Ltd is manufacturer of custom-made suits tailored to the requirements of each customer. They use predetermined overhead absorption rates in allocating overheads to each job. In the cutting department, the rate is based on direct labour hours and in the stitching department the rate is based on machine hours. The management of Equator Garments Ltd, wants to set overhead absorption rates to help in determining prices in the next financial year. The cost accountant has provided the following budgeted data for the next financial year. Cutting Stitching Direct labour cost 1,200,000 750,000 Factory overhead 1,500,000 1,620,000 Direct labour hours 60,000 30,000 Machine hours – 40,000 You are required to calculate the overhead absorption rates for each department (10 points)

 

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