Intermediate: Calculation of undertover recovery of overheads A company produces several products which pass through the two production departments in its factory. These two departments are concerned with filling and sealing operations. There are two service departments, maintenance and canteen, in the factory Predetermined overhead absorption rates, based on direct labour hours, are established for lhe two production departments.

The budgeted expenditure for these departments lor the period just ended, including the apportionment of service department overheads, was £110040 for filling, and £53300 for sealing.

Budgeted direct labour hours were 13100 for filling and 10250 for sealing.

Service department overheads are apportioned as follows:

During the period just ended, actual overhead costs and activity were as follows:

Required:

(a) Calculate the overheads absorbed in the period and the extent of the under/over absorption in each of the two production departments.

(b) State, and critically assess, the objectives of overhead apportionment and absorption

Transcribed Image Text:

Maintenance-Filling 70% - Sealing 27% - Canteen 3%