A company is preparing its production overhead budgets and determining the apportionm ent 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.

(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).

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

Transcribed Image Text:

Machine Machine Total Shop A Indirect wages () 78,560 8,586 Shop B 9,190 Main- Assembly Canteen tenance 15,674 29,650 15,460 Consumable materials incl. maintenance) () 16,900 6,400 8,700 1,200 600 Rent and rates () 16,700 Buildings insurance () 2,400 Power () 8,600 Heat and light () 3,400 Depreciation of machinery () 40,200 Area (sq ft) 45,000 10,000 12,000 15,000 6,000 2,000 Value of machinery () 402,000 201,000 179,000 22,000 Power usage - technical estimates (%) 100 55 40 3 Direct labour (hours) 35,000 8,000 6,200 20,800 Machine usage (hours) 25,200 7,200 18,000 -