Question
LILI SDN BHD is a manufacturer and supplier of home cabinets. It has two main Departments that is the Production Department and the Service Department.
LILI SDN BHD is a manufacturer and supplier of home cabinets. It has two main Departments that is the Production Department and the Service Department. The Production department has three (3) sub-departments: Machining, Assembly and Finishing. All three departments are labor-intensive. The Service Department has two sub-department which is Maintenance and General Services.
Cost Data
Production Departments | Service Departments | ||||
Cost Items (RM) | Fabrication | Assembly | Finishing | Maintenance | Gen.Services |
Indirect Supplies | 3,000 | 2,500 | 2,000 | 1,000 | 2,500 |
Indirect Labour | 18,000 | 10,000 | 8,000 | 4,500 | 1,500 |
Indirect Material | 5,000 | 3,500 | 1,000 | 1,000 | 1,800 |
Repairs | 2,000 | 1,000 | 1,000 | 1,500 | 200 |
Total | 28,000 | 17,000 | 12,000 | 8,000 | 6,000 |
LILI SDN BHD budgeted overhead cost for it’s three production and two service departments is as follows.
Common Overhead Cost Items | RM |
Rent and Rates | 128,000 |
Insurance for Machine | 60,000 |
Telephone Charges | 32,000 |
Depreciation | 180,000 |
Production Supervisor’s Salary | 240,000 |
Heating and Lighting | 64,000 |
Total | 704,000 |
The basis of allocation of the common overhead cost items is as follows:
Common Overhead Cost Items | Basis of allocation |
Rent & Rates | Floor area occupied |
Insurance for Machine | Machine Value |
Telephone charges | Floor area occupied |
Depreciation | Machine hours |
Production Supervisor’s salary | Direct labor hours |
Heating & lighting | Floor area occupied |
Other data:
Production Departments | Service Departments | ||||
| Fabrication | Assembly | Finishing | Maintenance | Gen. Services |
Floor area (sq. meters) | 30,000 | 18,000 | 6,000 | 6,000 | 4,000 |
Machine value | 240,000 | 100,000 | 80,000 | 40,000 | 20,000 |
Direct labor hrs. budgeted | 32,000 | 18,000 | 10,000 | | |
Labor rates per hr. | RM 3.80 | RM 3.50 | RM 3.40 | RM 3.00 | RM 3.00 |
Service Department: Maintenance cost apportioned | 50% | 25% | 25% | | |
Service Department: General Services cost apportioned | 20% | 30% | 50% | | |
Required:
(a) Prepare an overhead analysis sheet (cost allocation schedule) showing clearly the allocations, apportionments, and reapportionments to each cost center.
(b) Calculate the appropriate absorption rates for each production department.
The following jobs were completed for customers:
| Job 102 | Job 103 |
Direct material | RM 1,540 | RM 1,080 |
Direct Labour | 40 hours: Fabrication | 32 hours: Fabrication |
| 24 hours: Assembly | 20 hours: Assembly |
| 20 hours: Finishing | 28 hours: Finishing |
(c) Calculated the total cost for Job 102 & Job 103.
(d) If the firm quotes prices to customers that reflect a required profit of 25% on selling price, calculated the quoted selling price for each job.
Step by Step Solution
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