OVERHEAD ALLOCATION STATEMENT

Cost item	Basis	Total	Machine Centre A	Machine Centre B	Assembly	Materials Procure-ment	General Manuf Support
Primary allocation:
Indirect materials
Indirect labour
Property tax
Heating & lighting
Insurance: Machinery
Depreciation: Machinery	Carrying value of machinery	900000
Insurance: Buildings	Area	150 000
Salaries: Works Management
Secondary allocation:
Total allocated overheads

QUESTION 1 (20 Marks) REQUIRED 1.1 Prepare the overhead allocation statement (using traditional costing). (14 marks) 1.2 Calculate the allocation rate (expressed to the nearest cent) for each of the production centres, based on machine hours for Machine centres A and B and direct labour hours for Assembly. (3 marks) 1.3 Calculate the overheads applied to each batch of the product. (3 marks) INFORMATION Perth Limited has three production centres (Machine Centre A, Machine Centre B and an Assembly Centre) and two service centres (Materials Procurement and General Manufacturing Support). The annual overhead costs are as follows: \begin{tabular}{|l|r|} \hline General Manufacturing Support & 6000 \\ \hline Indirect labour: & \\ \hline Machine Centre A & 600000 \\ \hline Machine Centre B & 600000 \\ \hline Assembly & 900000 \\ \hline Materials Procurement & 660000 \\ \hline General Manufacturing Support & 888000 \\ \hline Heating and lighting & 300000 \\ \hline Property tax & 600000 \\ \hline Insurance of machinery & 90000 \\ \hline Depreciation of machinery & 900000 \\ \hline Insurance of buildings & 150000 \\ \hline Salaries of works management & 480000 \\ \hline \end{tabular} The following information is also provided: Total materials issues (both direct and indirect) to the production centres are as follows: Secondary allocation: The value of materials issued is used as a basis for the Materials Procurement cost centre. Direct labour hours is then used as the basis for the General Manufacturing Support cost centre. The product is produced in batches of 100 . Each unit spends 5 hours in the Machine Centre A, 10 hours in Machine Centre B and 10 hours in the Assembly Centre. QUESTION 1 (20 Marks) REQUIRED 1.1 Prepare the overhead allocation statement (using traditional costing). (14 marks) 1.2 Calculate the allocation rate (expressed to the nearest cent) for each of the production centres, based on machine hours for Machine centres A and B and direct labour hours for Assembly. (3 marks) 1.3 Calculate the overheads applied to each batch of the product. (3 marks) INFORMATION Perth Limited has three production centres (Machine Centre A, Machine Centre B and an Assembly Centre) and two service centres (Materials Procurement and General Manufacturing Support). The annual overhead costs are as follows: \begin{tabular}{|l|r|} \hline General Manufacturing Support & 6000 \\ \hline Indirect labour: & \\ \hline Machine Centre A & 600000 \\ \hline Machine Centre B & 600000 \\ \hline Assembly & 900000 \\ \hline Materials Procurement & 660000 \\ \hline General Manufacturing Support & 888000 \\ \hline Heating and lighting & 300000 \\ \hline Property tax & 600000 \\ \hline Insurance of machinery & 90000 \\ \hline Depreciation of machinery & 900000 \\ \hline Insurance of buildings & 150000 \\ \hline Salaries of works management & 480000 \\ \hline \end{tabular} The following information is also provided: Total materials issues (both direct and indirect) to the production centres are as follows: Secondary allocation: The value of materials issued is used as a basis for the Materials Procurement cost centre. Direct labour hours is then used as the basis for the General Manufacturing Support cost centre. The product is produced in batches of 100 . Each unit spends 5 hours in the Machine Centre A, 10 hours in Machine Centre B and 10 hours in the Assembly Centre