Ques.26 The preliminary budget for a company with four departments was as under: Department Direct overhead Allocation Apportioned Overhead (%) Direct Labour 1. 2. 3. 4. Total 14,200 10 7,200 30 16,400 20 22.600 40 60.400 1.76.000 Hours 60,000 2,00,000 1,20,000 1.50.000 5.30.000 It was decided to establish a new department (5) and to slightly reorganize the existing departments. The following alterations were agreed to in making a revised budget: (a) A sum of 15,000 being additional overhead, will be allocated directly to department 5. (b) An amount of 6,600 being overhead previously allocated directly to department 3 will now be transferred to department 5. (c) *30,000 additional overhead expected to be incurred due to re-organization, will be apportioned as follows: Department Proportion (%) 1 2 3 4 10 20 10 60 (d) Revised direct labour hours are expected to be: Department Hours 69,600 2 4 5 Total 2,00,000 1,00,000 1,60,000 90,000 6,19,600 You are required to calculate: a) The departmental direct labour hour rates of overhead, based on the preliminary budget. b) The departmental direct labour hour rates of overhead, based on the revised budget. c) The overhead chargeable at the revised rates to one unit of product "X" for which the following hours are spent in each department: Department 1 3 5 Hours [Ans. (c) 10.92] 6 4 4 8 [ICWA (Inter) Dec. 1988]