Question
Q.A company has three production cost centres (P1, P2 and P3) and two service cost centres (S1 and S2) in its factory.The actual production overhead
Q.A company has three production cost centres (P1, P2 and P3) and two service cost centres (S1 and S2) in its factory.The actual production overhead costs for a period, totalling K487,430, have been allocated and apportioned to cost centres as follows:
Production cost centre Service cost centre P1 P2 P3 S1 S2 Overheads K176,860 K96,250 K134,770 K42,150 K37,400 The overheads of service cost centre S1 are reapportioned on the basis of the number of materials requisition notes (MRN) raised in the period. The overheads of service cost centre S2 are reapportioned on the basis of the number of employees in the other cost centres. The following additional actual information is available for the period: Cost centre Number of employees Number of MRNs P1 20 4,970 P2 25 3,550 P3 50 5,680 S1 8 S2 5 Required: (a) Reapportion the service cost centre overheads. (9 marks) (b) The predetermined production overhead rates for the period, used to absorb overheads, are: P1 P2 P3 K2460 per machine hour K1340 per direct labour hour K1080 per direct labour hour Machine hours and direct labour hours in each production cost centre are: Cost centre Machine hours Direct labour hours Budget Actual Budget Actual P1 8,100 8,250 3,650 3,680 P2 1,960 1,880 8,650 8,440 P3 3,610 3,720 15,600 15,990 Required: Calculate for the period for each production cost centre: (i) The amount of overheads absorbed; (4 marks) (ii) The amount of any over or under absorption of overheads. (6 marks) (iii) Describe the three methods used in overhead reapportionment (6 Marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started