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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
    Variable Overhead:
    Completed units (7500*0.75*2) 112500
    Work in progress (500*0.75*0.6*12) 450
    Fixed overhead:
    Completed units (7500*0.75*9) 50625
    Work in progress (500*0.75*0.6*9) 2025

    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 Preview

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

    For ...

    Solution Summary

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