(a) Indicate whether the following statements are ‘True’ or ‘False’.

(i) Factory overheads are direct manufacturing costs.

(ii) Indirect labour and indirect materials form part of factory overheads.

(iii) Factory overheads are common costs and are shared among various cost centres.

(iv) Allotment of whole items of cost to cost centres is referred to as cost apportionment.

(v) Allotment of factory overheads to cost units by means of predetermined factory overhead application rate is called overhead absorption.

(vi) Normal capacity is less than theoretical capacity.

(b) In the following multiple choice questions, select the correct answers:

(vii) Which of the following is correct factory overheads application rate given:

Budgeted fixed overhead costs – ₹6 lakh; Variable overhead cost ₹100 per unit; Theoretical capacity

– 3,000 units; and Normal capacity – 2,000 units.

(a) ₹400 per unit,

(b) ₹300 per unit,

(c) ₹350 per unit,

(d) None of these.

(viii) Compute the machine hour rate from the data below:

Cost of machine ₹3,00,000; Estimated scrap value after expiry of its useful life (5 years) ₹50,000.

Assume machine is subject to straight line method of depreciation; Rent and rates per month

₹2,000; Insurance premium/annum ₹6,000; and Estimated working hours/annum 2,000.

(a) ₹40 per machine hour,

(b) ₹30 per machine hour,

(c) ₹35 per machine hour,

(d) None of these.

(ix) Following data is available: Factory overhead absorption rate is 50 per machine-hour; 10,000 machine-hours were used; If actual factory overheads are ₹6,00,000. This implies that firm has

(a) Under-absorption,

(b) Over-absorption,

(c) Under-allocation,

(d) Over-allocation.