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Zacotax Limited Absorption of fixed overhead You have been working as a Cost and Management Accountant in Zacotex Ltd. a maufacture company, manufactures and sells a range of products. Its budgeted production averheads for year 6 were 150,000 and budgeted direct labour hours were 50,000 hours. Actual results in Year 6 were as follows: Sales 630,000 Direct materials costs 130,000 Direct labour costs 160,000 Production overheads 140,000 (40,000 hours) Administration overheads 70,000 Selling and distribution Overhead 90,000 There was no opening or elosing inventory at the beginning or end of year 6. The company uses an absorption costing system, and production overhead is absorbed using a direct labour hour rate Required: ) Determine the over or under absorption of fixed overhead. 2) Calculate the full production cost 3) Show how the profit or loss for the year will be reported
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