A company is preparing overhead budgets and determining the apportionment of these overheads to products.

Cost centre expenses and related information have been budgeted as *

follows:

Required:

(a) Determine budgeted overhead absorption rates for each of the production departments, using bases of apportionment and absorption which you consider most appropriate from the information provided. (13 marks)

(b) On the assumption that actual activity was:

and total production overhead expenditure was £176 533, prepare the production overhead control account for the year (you are to assume that the company has a separate cost accounting system). (6 marks)

(c) Explain the meaning of the word ‘control’ in the title of the account prepared in answer to (b).

Transcribed Image Text:

Machine Machine Indirect wages () Total 78 560 Shop A 8.586 Shop B 9 190 Assembly Canteen Main- tenance 15 674 29 650 15 460 Consumable materials (incl. maintenance) () 16.900 6 400 8 700 1 200 600 Rent and rates () Buildings insurance () -16 700 2 400 Power () Heat and light () 8.600 3 400 Depreciation of machinery () 40 200 Area (sq ft) 45 000 10 000 Value of machinery () 402 000 201 000 12 000 179 000 15.000 22 000 6.000 2 000 4 - 80 Power usage technical estimates (%) Direct labour (hours) Machine usage (hours) 100 * 55 40 3 35 000 8 000 6 200 20 800 2 70 20 25 200 7.200 18.000 - Sc