Practical question-overheads Flowers Limited had three production departments, X, Y and Z, and two service departments, Stores and General Services. For the forthcoming period, the total budgeted overhead costs are as follows: Allocated costs (N9000) Indirect Department Y Z Stores General services material 20 10 10 6 3 Indirect labour 12 12 8 8 6 21 33 Heat and light Rent Plant insurance Building insurance Canteen 21 12 18 Z 6 4 15 50 7 20 10 3 80 8 100 1.2 The following information is also available: General Department Y Stores services labour rate per hour (NS) 5 Total direct labour hours (000) 12 12 Employees Area (000m) Plant valuation (N9000) 120 Material requisitions (000) The company absorbs its production overhead by using direct labour rates. You are required to: a) Prepare an overhead analysis for the forthcoming period, showing clearly the bases of apportionment used. (Work to the nearest NS). b) Calculate the direct labour hour rate for overhead absorption for each of the three production departments. (Work to two decimal places). c) State one alternative to an hourly rate for overhead absorption, and state why hourly rates are considered to be the most suitable method for overhead absorption d) The company has been asked to quote a selling price for a job, the specifications of which are: 40 6 100 1.8 6 40 60 1 1 CS Scanned with CamScanner Practical question-overheads Flowers Limited had three production departments, X, Y and Z, and two service departments, Stores and General Services. For the forthcoming period, the total budgeted overhead costs are as follows: Allocated costs (N9000) Indirect Department Y Z Stores General services material 20 10 10 6 3 Indirect labour 12 12 8 8 6 21 33 Heat and light Rent Plant insurance Building insurance Canteen 21 12 18 Z 6 4 15 50 7 20 10 3 80 8 100 1.2 The following information is also available: General Department Y Stores services labour rate per hour (NS) 5 Total direct labour hours (000) 12 12 Employees Area (000m) Plant valuation (N9000) 120 Material requisitions (000) The company absorbs its production overhead by using direct labour rates. You are required to: a) Prepare an overhead analysis for the forthcoming period, showing clearly the bases of apportionment used. (Work to the nearest NS). b) Calculate the direct labour hour rate for overhead absorption for each of the three production departments. (Work to two decimal places). c) State one alternative to an hourly rate for overhead absorption, and state why hourly rates are considered to be the most suitable method for overhead absorption d) The company has been asked to quote a selling price for a job, the specifications of which are: 40 6 100 1.8 6 40 60 1 1 CS Scanned with CamScanner
