Horden Products Ltd manufactures goods which could involve any or all of three production departments. These departments are simply entitled A, B and C. A direct wages cost percentage absorption rate for the recovery of production overheads is applied to individual job costs.

Details from the company’s budgets for the year ended 31 March 20X5 are as follows:

Machinery is depreciated on the basis of 20% on cost.
Job No. 347 passed through all three departments and incurred the following actual direct costs and times:

A sum amounting to 30% of the production cost is added to every job to enable a selling price to be quoted.
Required:

(a) A statement to show the total production overheads per department and calculate the absorption rate which the company has adopted. (8 marks)

(b) Calculate the selling price to be quoted for Job No. 347. (8 marks)

(c) Using the available data, calculate absorption rates when based on:
(i ) direct labour hour rate (3 marks)
(ii ) machine hour rate. (3 marks)

(d) Explain clearly the meaning of the following terms relating to overheads:
(i ) allotment (3 marks)
(ii ) allocation (3 marks)
(iii ) apportionment.

Transcribed Image Text:

Indirect materials Dept A 23,000 Dept B 35,000 Dept C 57,000 Indirect wages 21,000 34,000 55,000 Direct wages 140,000 200,000 125,000 Direct labour hours 25,000 50,000 60,000 Machine hours 100,000 40,000 10,000 The following information is also available for the production departments: Dept A Dept B Dept C Area (square metres) 30,000 20,000 10,000 Cost of machinery 220,000 160,000 20,000 Horse power of machinery 55 30 15 Other budgeted figures are: Power 120,000 Rent, rates, light, heat 90,000 Insurance (machinery) 20,000 Depreciation 80,000