QUESTION 2

The annual overhead costs for the Collins Brew Company Ltd which has three production centres (two machine centres and one assembly centre) and two service centres (materials procurement and general factory support) are as follows:

GH GH

Indirect wages and supervision

Machine centres: A 3,000,000

B3,000,000

Assembly 4,500,000

Materials procurement 3,300,000

General factory support 4,440,000 18,240,000

Indirect materials

Machine centres: A 1,500,000

B 2,415,000

Assembly 315,000

Materials procurement 0

General factory support 30,000 4,260,000

Lighting and heating 1,500,000

Property taxes 3,000,000

Insurance of machinery 450,000

Depreciation of machinery 4,500,000

Insurance of buildings 750,000

Salaries of works management 2,400,000 12,600,000

35,100,000

The following information is also available:

VALUE OF MACHINERY

FLOOR AREA (SQ. METERS)

NUMBER OF EMPLOYEES

DIRECT LABOUR HOURS

MACHINE HOURS

GH

MACHINE SHOP: A

24000000

30000

900

3000000

6000000

B

15000000

15000

600

3000000

2000000

ASSEMBLY

3000000

45000

900

6000000

STORES/MATERIAL PROCUREMENT

1500000

45000

300

MAINTENANCE/GEN. FACTORY SUPPORT

1500000

15000

300

45000000

150000

3000

Details of total materials issues (i.e. direct and indirect materials) to the production centres are as follows:

Machine shop X

12,000,000

Machine shop Y

9,000,000

Assembly

3,000,000

24,000,000

The service rendered by the factory support department to Machine shop A, Machine Shop B and Assembly was 25%, 25% and 50% respectively.

Required:

Prepare the overhead analysis sheet and calculate the amount of overheads to charge if the product spends 60 hours in Machine shop X and 135 hours in Machine shop Y and 15 hours in Assembly department