Question 1:

In the following embedded Excel file you will find budget and actual production information provided by Bart Trading.

Using this information you are required to:

(a)Calculate the predetermined budgeted factory overhead rate for the year based

on Direct Labour Hours

(b)Calculate the amount of factory overhead applied in the year,

(c)Calculate the under or over-applied overhead for the year,

(d)Calculate both the spending and capacity variances, and

(e)Explain possible causes of the spending and capacity variances.

Cost Drivers and Overhead Costs for TAFE Manufacturing

Cost Drivers

Cost driver Statistical data Service departments Production Departments

. (Basis for allocation) Stores Maintenance General Production Finishing

Expenses Allocations

Premises ins Floor space (sq. m) 300 20 10 400 200 Machine dep-

reciation Value of machinery $5,000 $80,000 $15,000

Service Department Re-allocations

Stores dept. No. of requisitions 300 2,800 500

M.tenance dept. M.tenance hrs 1,000 300 16,300 3,800 General dept. No. of employees 2 2 1 3 3

Production Departments Recovery Rate Determination

Production dept. Machine hours 500 10,000 1,500 Finishing dept. Direct labour $150,000 140,000

Allocation of Service Department Costs

Overhead Costs Service Departments Producing Departments Total Budgeted Costs Stores Maintenance General Production Finishing

$ $ $ $ $ $

Indirect materials 1,530 18,746 14,844 12,190 11,460 58,770 Indirect labour 49,330 56,000 58,800 3,200 2,670 170,000 (a) Premises insurance x x x x x 1,860 (a) Machine depreciation x x x x x 15,000

(b) Unadjusted O/Heads x x 245,630

O/Head reallocations

(c) Stores x x x

(c) Maintenance x x x

(c) General x x x

(d) Adjusted O/Heads x x x

Production Finishing

(e) Overhead Recovery Rate x x