Product X is produced in two production cost centres. Budgeted data for product X are as follows: & Cost centre A & Cost centre B Direct material cost per unit & £ 60.00 & £ 30.30 Direct labour hours per unit & 3 & 1 Direct labour rate per hour & £ 20.00 & £ 15.20 Production overhead absorption rate per direct labour hour & £ 12.24 & £ 14.94 General overheads are absorbed into product costs at a rate of 10 % of total production cost. Requirement If a 20 % return on sales is required from product X , its selling price per unit should be £ 298.60 £ 282.31 £ 271.45 £ 286.66

## Step 1: Calculate Total Production Cost per Unit<br />### For each cost centre, calculate the total production cost per unit by adding direct material cost, direct labour cost, and production overheads.<br /><br />- **Cost Centre A:**<br /> - Direct Material Cost = £60.00<br /> - Direct Labour Cost = Direct Labour Hours × Direct Labour Rate = $3 \times £20.00 = £60.00$<br /> - Production Overheads = Direct Labour Hours × Overhead Absorption Rate = $3 \times £12.24 = £36.72$<br /> - Total Cost for Cost Centre A = £60.00 + £60.00 + £36.72 = £156.72<br /><br />- **Cost Centre B:**<br /> - Direct Material Cost = £30.30<br /> - Direct Labour Cost = Direct Labour Hours × Direct Labour Rate = $1 \times £15.20 = £15.20$<br /> - Production Overheads = Direct Labour Hours × Overhead Absorption Rate = $1 \times £14.94 = £14.94$<br /> - Total Cost for Cost Centre B = £30.30 + £15.20 + £14.94 = £60.44<br /><br />## Step 2: Calculate Combined Total Production Cost per Unit<br />### Add the total costs from both cost centres to get the combined total production cost per unit.<br />- Combined Total Production Cost = £156.72 (Cost Centre A) + £60.44 (Cost Centre B) = £217.16<br /><br />## Step 3: Calculate General Overheads<br />### General overheads are absorbed at a rate of $10\%$ of the total production cost.<br />- General Overheads = $10\% \times £217.16 = £21.716$<br /><br />## Step 4: Calculate Total Cost Including General Overheads<br />### Add general overheads to the combined total production cost.<br />- Total Cost Including General Overheads = £217.16 + £21.716 = £238.876<br /><br />## Step 5: Determine Selling Price for Required Return on Sales<br />### To achieve a $20\%$ return on sales, the selling price should be calculated as follows:<br />- Let \( S \) be the selling price. Then, \( S - £238.876 = 0.2S \)<br />- Solving for \( S \), we have:<br /> \[<br /> S = \frac{£238.876}{1 - 0.2} = \frac{£238.876}{0.8} = £298.595<br /> \]<br /><br />## Step 6: Choose the Closest Option<br />### Compare the calculated selling price with the given options to find the closest match.