(a) Explain the difference between the terms overhead allotment, overhead apportionment and overhead absorption.

(b) Why are estimated figures used in calculating overhead absorption rates?

(c) The following information relates to the Flyby Knight Plc for the six months ended 31 December 2001:

(i) Use the continuous apportionment (repeated distribution) method to apportion the service departments’ overheads between each other.
(ii) Apportion the service departments’ overheads calculated in (/) to the production departments.
(iii) Show how the overheads apportioned to the production departments would have differed if the elimination method had been used for the service departments.
(iv) State how far it is true to say that the elimination method produces an inaccurate answer, and is therefore not to be recommended.

Transcribed Image Text:

A Overheads () 14,000 Production Departments B 12,000 Overheads to be apportioned: Dept X (%) 35 30 Dept Y (%) 30 40 Service Departments X Y 3,000 C 8,000 4,000 25 20 25 15 15