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Q4. JCB Plc has three production departments, A, B and C and two service departments, D and E. At the present time the company uses
Q4. JCB Plc has three production departments, A, B and C and two service departments, D and E. At the present time the company uses a plant-wide overhead absorption rate of 3 per direct labour hour when calculating the cost of job 123 passing through the factory. A new accountant has been appointed and she decides to use separate departmental absorption rates to recover overheads. These absorption rates are based on the following information. Production departments Service departments 15,000 6,550 5,000 9,350 8,500 6.150 3,850 1,000 Indirect labour Area (sq m) Number of employees Machinery costs Machine hours Direct labour hours 10,000 200 8,000 1,500 120 90,000 80,000 120,000 12,000 18,000 20 40,000 2,000 3,000 30 30,000 1,000 2,000 17,000 12,000 25,000 Overhead costs Indirect labour Depreciation of machinery Heating and lighting Factory administration Total cost 40,900 236,000 52,000 4,500 75,000 13.000 Rent and rates Additional information on apportionment of overhead costs: 1. Indirect labour is already allocated. 2. Depreciation is apportioned based on machinery cost 3. Heating is a 4. Factory admin is apportioned based on employee numbers 5. Machinery supervision is apportioned based on machine hours 6. Rent/rates is apportioned based on area based on area
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