COST ACCOUNTING : OVERHEAD

Ibnu Sina Sdn Bhd has three production departments; Designing, Altering and Finishing and two service departments; Store and Administration. Designing and Finishing are machine oriented, while Altering is labour intensive. The following information relates to the allocated costs of each department: Indirect wages Indirect material Maintenance Other costs for the period are: Rent Insurance on building Lighting Direct wages Direct material Depreciation on machinery Supervisor's salary Floor area (sq. meters) Book value of machinery (RM) Building value (RM) Light points Number of employees Direct labour hours Machine hours The following additional information is given: Designing 12,500 25,000 100,000 88 Designing RM Store 4,000 6,000 5,490 Administration Altering Finishing Store Administration RM RM RM RM 6,500 2,000 1,059 RM 6,000 950 1,600 58,200 41,500 3,500 10,000 Altering 6,500 15,000 Cost of the service departments are apportioned as follows: Designing Altering 50% 30% 25% 40% 52,000 36 150 80 20,000 28,500 30,800 15,000 7,500 2,500 1,820 28,000 20 500 800 700 Finishing Store Administration 3,500 1,000 1,500 5,000 2,000 8,000 6 30 100 18,500 26,000 1,500 400 1,200 Finishing Store 15% 20% 15% 12,000 9 40 Administration 5% Required: a. b. C. Prepare an overhead analysis sheet, clearly showing the basis of apportionment. (Note: All calculations should be rounded up to the nearest RM) (21 marks) Calculate the overhead absorption rates (OAR) for each of the production department. (Note: All calculations should be rounded up to two decimal places) (3 marks) Compute the over-absorption or under-absorption of overheads for each production department. The actual information for the overhead costs is as follows: Designing 32,490 15,000 14,500 Total overheads (RM) Direct labour hours Machine hours Altering 15,650 19,000 15,800 Finishing 13,900 17,000 28,300 (6 marke)