- Good to use if production is labour intensive
- Not linked with changes in wage rates and so will remain accurate if rates change
Disadvantage:
- Difficult to keep consistent if there are different classes of labour employed
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Machine hours
Advantages:
- Good to use this if production is capital intensive
- Increasingly more suitable as automation leads to more capital intensive production processes
Disadvantage:
- Different classes of machinery require different calculations to be made
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% Direct Labour Cost
Advantages:
- More stable in terms of fluctuations in cost than when using material cost
- Useful where there are similar goods produced by uniformly paid labour
Disadvantage:
- No distinction is made between fast and slow workers: may lead to inaccuracies
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% Direct Materials
Advantage:
- Simple to calculate
Disadvantages:
- May be misleading as there is no direct relationship between overheads & materials
- Does not take into account the time required for production
- Only useful to use if the material cost is uniform
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% Prime Cost
Advantage:
- Simple, quick & convenient to calculate
Disadvantage:
- Not very accurate: number of variables used in calculation may cause innaccuracies
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Production unit
Advantage:
- Simple and quick to calculate
Disadvantage:
- Only suitable to use when there is one standard task
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