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Harum Wangi Tea Sdn Bhd processes tea leaves to produces tea powder. The product has to go through two processing departments which are Grinding and
Harum Wangi Tea Sdn Bhd processes tea leaves to produces tea powder. The product has to go through two processing departments which are Grinding and Mixing department. In facilitating production process, two service departments are involved. They are Inspection and Store department. Below are the budgeted costs for the business for December 2019: Allocated Overhead: RM Grinding 64,000 Mixing 48,800 Inspection 29,200 Store 17,200 Other Overheads: RM Utilities 44,000 Insurance of building 50,500 Power and heating 25,800 Rent and rates 28,800 The following additional information is available below: of Kilowatt Machine Direct Material Hours Hours Labour Handling Cost (%) (RM) Number of Inspection Book Floor Value of Space Building Occupied (RM) (Square meters) 120,000 4,200 72,000 2,600 10,000 1,600 15,000 1,200 217,000 9,600 32,200 8,500 Grinding Mixing Inspection Store Total 400 800 200 100 1,500 20,500 166,600 10,000 8 10 55 40 5 4 22 40,700 197,100 100 Required: a) Prepare an Overhead Analysis Sheet for Harum Wangi Tea Sdn Bhd and show clearly the basis of apportionment. Use repeated distribution method for reapportionment of service cost center. (All calculation to be rounded to the nearest RM) (16 marks) b) Calculate the departmental overhead absorption rate (CAR) for Grinding and Mixing department using machine hours and direct labour cost, respectively. (All calculation to be rounded to two decimal places) (2 marks) c) Given the actual overheads cost for Grinding and Mixing Departments are RM 195,000 and RM 114,300 respectively, calculate the over or under absorption of overhead for the two departments if the actual machine hours for Grinding is 35,000 hours and the actual direct labour cost for Mixing is RM 150,500. (All calculation to be rounded to the nearest RM) (4 marks) d) Based on your answer in (c) determine which production department is not efficient in controlling its' cost management and suggest any improvement that should be taken by the company for future production plan. (6 marks)
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