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Presco PLC Process 2 is calculated with 0.75%. Explain how this was computed

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Presco PLC manufactures products which pass through threee processes. The costing records for processes 1 and 2 give the following information:

Process 1 Process 2
Materials per unit 2 Kilos 3 litres
Cost of materials per Kilo/litre $ 2.50 $1.50
Materials used in process at cost $ 40 000
Additional materials used in process To be calculated
Direct labour per unit 2 hours 45 minutes
Labour cost per hour $ 14 $ 12
variable overhead per unit 3 per direct $2per direct
labour hour labour hour
Fixed over head absorption date $ 4.50 per direct $9 per direct
Labour hour labour hour

Further information

Process 1: There was no opening or closing stocks of work in progress.
All production from this process was passed to Process 2.

Process 2: There was no opening stock of work in progress.There was a closing stock of work in progress consisting of 500 units which were complete as to 80 per cent of materials and 60 per cent of labour.

Working Process 2:
Direct labour:
Completed units (7500*0.75*$12) 67500
Work in progress (500*0.75*0.6*12) 2700
______
70200
______
Variable Overhead:
Completed units (7500*0.75*2) 112500
Work in progress (500*0.75*0.6*12) 450
_______
11700
_______
Fixed overhead:
Completed units (7500*0.75*9) 50625
Work in progress (500*0.75*0.6*9) 2025
_______
52650
________

I am preparing for my mid term exam and I like to know how my teacher calculated 0.75% in working process 2 because I not find any such figure in the question. Please explain me with reason why he calculated with 0.75% and how did he get this 0.75%.

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Solution Summary

The solution explains how and why the .75% was used in the problem and then explains the conversion needed.

Solution Preview

The .75 or 75% is the number of hours in 45 minutes.

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