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SSC Financial and Cost Accounting P-1 QUESTION #6096
Question 1

A product sells for $384 with a 50% mark-up. Unit costs are:

  • Direct materials: 4kg at $8/kg
  • Direct labour: 8 hours at $12/hour
  • Selling and distribution: $40

What is the factory overhead absorption rate per labour hour?

  • $3
  • $5
  • $11✔️
  • $22
Correct Answer Explanation

1. Total Cost = Selling Price / 1.5 = $384 / 1.5 = $256.
2. Direct Materials = $32. Direct Labour = $96. Selling/Dist = $40.
3. Total cost accounted for = $32 + $96 + $40 = $168.
4. Factory Overhead = $256 - $168 = $88.
5. Rate per hour = $88 / 8 hours = $11.