13.2 Tassell Ltd is a manufacturing company specializing in the production of two machines, XX and YY. The manufacturing process for the two machines is different and this necessitates a separate production department for each. The managing director of the company is considering a revised selling price for each machine.

The estimated costs for the next 12 months are as follows:

Dept. of Manufacturing Admin. & Support Services XX YY Stores Dept

£ £ £ £

Direct wages – 891,880 144,900 –

Direct materials – 2,043,216 5,924,800 –

Rent and rates 81,000 Power 23,200 Heat and light 11,740 Salaries and indirect wages 196,300 128,640 64,185 144,415 Insurance of:
Buildings 8,910 Machinery 5,750 Office equipment 1,000 Depreciation of:
Buildings 5,940 Machinery 23,000 Office equipment 4,000 Miscellaneous expenses 2,190 12,210 6,875 5,775 Other than salaries and indirect wages and miscellaneous expenses, the overheads have not yet been spread on to individual cost centres.
Additional information for the forthcoming year is as follows:
Dept. of Manufacturing Admin. & XX YY Stores Dept Support Services No. of employees 14 71 17 12 Stores requisitions 20 600 840 –
Value of:
Buildings (whole site) £540,000 Machinery – £110,000 £420,000 £45,000 Office equipment £60,000 – – –
Floor area (sq. metres) 220 800 600 1,080 Cubic capacity (metres) – 3,200 2,300 5,540 Direct labour hours – 121,620 22,560 –
Machine operating hours – 12,000 46,000 –
Units produced – 162,160 322,000 –

(a) Prepare an overhead analysis sheet for Tassell Ltd in respect of the year. Clearly show the basis of apportionment where appropriate. (15 marks)

(b) Calculate an appropriate overhead recovery rate for each productive cost centre.
(2 marks)

(c) The managing director of Tassell Ltd has decided to add £1.80 to each unit of XX and YY to cover other costs and profit element. Establish a selling price for each product which covers the company’s direct costs; overheads; other costs; and profit element.
(5 marks)
(Total 22 marks)
(ICSA, Introduction to Accounting)