Intermediate: Preparation of production overhead account Shown below are extracts from the previous month's production and overhead budgets for the finishing department of a manufactunng company Budgeted production.

Product A 560 units Product B 340 units Product C 205 units The standard hour content of each product is:

Product A 3 standard hours per unit Product 8 5 standard hours per unit Product C 4 standard hours per unit The budgeted overheads at two specified levels of activity are

It should be assumed that the fixed cost content of the above overheads remains constant at all levels of activity and that the variable content varies with standard hours produced.
Actual production activity and overhead expenditure in the finishing department for the previous month were:
Production:

The company operates a full absorption costing system and the budgeted overhead absorption rate for a particular month is based upon the standard hours of budgeted production for that month.
Required:

(a) Produce the finishing department's production overhead control account for the previous month. All workings should be clearly shown. {11 marks)

(b) Analyse the under/over absorbed overhead calculated in {a)
above. Make whatever calculations you consider necessary.
(7 marks)

(c) Outline possible reasons for the under/over absorbed overhead

Transcribed Image Text:

4500 3700 standard standard Activity level hours hours () () Depreciation 9540 9540 Inspection services 4250 4250 Indirect materials 1125 925 Maintenance of plant 3300 3140 Indirect labour 10900 9780 Electricity 2700 2220 31815 29855