Question
Afurniturebusinessmanufacturesqualityfurnituretocustomers'orders.Ithasthreeproduction departmentsandtwoservicedepartments.Overheadsincurredforthemonthjustendedareas follows: RM Allocated overhead 12,400 Machine insurance 8,000 Rent and rates 21,000 Indirect materials 5,000 Heating and lighting 10,000 Telephone expenses 2,000 Depreciation
Afurniturebusinessmanufacturesqualityfurnituretocustomers'orders.Ithasthreeproduction departmentsandtwoservicedepartments.Overheadsincurredforthemonthjustendedareas follows:
RM | |
Allocated overhead | 12,400 |
Machine insurance | 8,000 |
Rent and rates | 21,000 |
Indirect materials | 5,000 |
Heating and lighting | 10,000 |
Telephone expenses | 2,000 |
Depreciation | 24,000 |
Supervisors' salaries | 6,000 |
88,400 |
The three production departments, A, B, and C, and the two service departments, X and Y, are housed in the same premises, the details of which, together with other statistics and information, are given below:
Departments | |||||
A | B | C | X | Y | |
Floor area occupied (sq. metres) | 3,000 | 1,500 | 1,500 | 600 | 400 |
Direct labour hours | 2,000 | 1,200 | 1,800 | - | - |
Labour rates per hour | RM4 | RM3 | RM2 | - | - |
Machine value (RM000) | 30 | 20 | 10 | - | - |
Value of materials issued (RM000) | 100 | 50 | 30 | - | - |
Allocated overheads: | |||||
Specific to each department | 2,900 | 3,000 | 4,000 | 1,500 | 1,000 |
Service department X's cost apportioned | 50% | 25% | 25% | - | - |
Service department Y's cost apportioned | 20% | 30% | 50% | - | - |
REQUIRED:
- Prepareastatementshowingtheoverheadcostforeachdepartment,showingthebasisof apportionmentused.
- Calculate suitable overhead absorption rates using the direct labour hoursbases.
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