QUESTION 5 (40 MARKS) Bino Ltd produces suits in three separate production departments (viz. Cutting, Sewing and Finishing). Production is serviced by three service centres (viz. Material store, Canteen and Maintenance). The Material store cost centres costs are apportioned to other departments using the direct method while the reciprocal method based on simultaneous equations is used to apportion Canteen and Maintenance centres costs. The Maintenance costs are apportioned based on floor area. It is Binos policy to set selling prices to ensure a profit margin of 30% on sales. The company received a new order for 1 000 suits which will require the following costs: Cost Quantity and price Material- fabric 1 500 metres costing N$20 per metre Direct labour 2 000 hours at a rate of N$30 per hour Administration and selling costs 10% of production costs The following hours will also be needed for the 1 000 suits. Cutting Sewing Finishing Direct Labour Hours 1 000 300 700 Machine hours 700 500 200 Budgeted expenses and other details for the year ended 28 February 2020 were as follows: Table 1: Budgeted manufacturing costs and overhead allocation bases. Total Cutting Sewing Finishing Material store Canteen Maintenance N$ N$ N$ N$ N$ N$ N$ Direct wages (N$) 120 000 50 000 30 000 40 000 - - - Indirect wages (N$) 100 000 10 000 20 000 20 000 32 000 10 000 8 000 Consumables (N$) 50 000 5 000 4 000 20 000 - 15 000 6 000 Depreciation Equip. (N$) 90 000 ? ? ? ? ? ? Fuel (N$) 30 000 ? ? ? ? ? ? Heat and light(N$) 15 000 ? ? ? ? ? ? Rental and prop. Taxes (N$) 45 000 ? ? ? ? ? ? Equipment Value (N$) 300 000 100 000 60 000 100 000 10 000 10 000 20 000 Number of Employees 250 25 100 100 10 10 5 Floor space used (m2 ) 30 000 9 000 9 000 8 000 2 000 1 000 1 000 Fuel usage (%) 100 30 10 40 10 5 5 Direct labour hours 100 000 8 000 50 000 42 000 - - - Machine hours 90 000 15 000 45 000 30 000 - - - Material issues (%) 100 60 15 15 - - 10 It is company policy to allocate/(absorb) manufacturing overheads in the cutting department based on direct labour hours while the manufacturing overheads in the sewing and finishing departments are allocated/(absorbed) based on machine hours.

Now assume that the primary apportionment has been correctly done for you as follows: Table 2: Primary allocation of production overheads Total Cutting Sewing Finishing Material store Canteen Maintenance N$ N$ N$ N$ N$ N$ N$ Total overheads 330 000 72 000 63 000 98 000 42 000 31 500 23 500 Required: Mark 5.3 Using the primary apportioned overheads in Table 2, and any relevant information from the question including Table 1, perform a secondary overhead apportionment of service departmental overheads to production departments using (i) appropriate basis of apportionment and (ii) applicable method(s) of apportioning service departmental overheads to production departments. 5.4 Calculate the predetermined overhead ratesto be used in each of the three production departments. 5.6 Determine the sales value of the 1 000 suits ordered. 5.7 Assuming that for the year ended 28 February 2019 the actual manufacturing overheads for the sewing department were N$110 000, actual machine hours were 000 hours and actual direct labour hours were 000 hours, calculate the over/under absorption of manufacturing overheads in the sewing departments. 5.8 Explain how under/over recoveries of overheads arise and why pre-determined overhead rates are used.

QUESTIONS (80 MARKS Bine und produces suits in three separate production departments (ve Cutting Sewing and Finishing Production is serviced by three service centres viz. Material store, Canteen and Maintenance. The Material store cost centres costs are apportioned to other departments using the direct method while the reciprocal method based on simultaneous equations is used to apportion Canteen and Maintenance centres costs. The Maintenance costs are apportioned based on floor area. Itis Bino's policytoset selling prices to ensure a profit margin of 30% on sales. Page 19 of 27 The company received a new order for 1 000 suits which will require the following costs: Cost Material fabric Direct labour Administration and selling costs Quantity and price | 1 500 metres costing N$20 per metre 12000 hours at a rate of NS30 per hour 10% of production costs The following hours will also be needed for the 1000 suits. Finishing Direct Labour Hours Machine hours 1000 700 Sewing 300 500 Budgeted expenses and other details for the yearended 28February 2020 were as follows: Table 1: Budgeted manufacturing costs and overhead allocation bases. Total Cutting Sewing Maastore Canteen Maintenance NS NS NS NS Die 120000 50000 30000 40000 Indirect was INS) 100000 10000 20000 20000 2000110000 0 50000 50001 4 000 20 000 Equip INS) 90 000 300000 100000 60000 10000 10000 10000 2000 1000 30000 100 9000 9000 300 8000 40 90000 15000 45000 30 000 it is company policy to allocate absorb manufacturing overheads in the cutting department based on direct labour hours while the manufacturing overheads in the sewing and finishing departments are allocated/absorbed based on machine hours. Now assume that the primary apportionment has been correctly done for you as follows: Table 2: Primary allocation of production overheads Total NS Cutting NS Sewing NS Finishing NS Material store N$ Canteen N$ Maintenance T N$ Total overheads 330 000 72 000 63 000 | 98000 42 000 31500 | 23 500 Mark 10 Required: Using the primary apportioned overheads in Table 2, and any relevant information from the question including Table 1, perform a secondary overhead apportionment of 5.3 service departmental overheads to production departments using (i) appropriate basis of apportionment and (ii) applicable method(s) of apportioning service departmental overheads to production departments. Calculate the predeterminedoverhead rates to be used in each of the three production departments. 5.6 Determine the sales value of the 1 000 suits ordered. Assuming that for the year ended 28 February 2019 the actual manufacturing overheads for the sewing department were N$110 000, actual machine hours were 14 000 hours and actual direct labour hours were 9 000 hours, calculate the over/under absorption of manufacturing overheads in the sewing departments. Explain how under/over recoveries of overheads arise and why pre-determined 5.8 overhead rates are used. Total 40 End of assignment 1: 125 marks QUESTIONS (40 MARKS) Bino Ltd produces suits in three separate production departments (viz. Cutting Sewing and Finishing Production is serviced by three service centres (viz. Material store, Canteen and Maintenance). The Material store cost centre's costs are apportioned to other departments using the direct method while the reciprocal method based on simultaneous equations is used to apportion Canteen and Maintenance centres' costs. The Maintenance costs are apportioned based on floor area. It is Bino's policy to set selling prices to ensure a profit margin of 30% on sales Page 19 of 27 The company received a new order for 1 000 suits which will require the following costs: Cost Quantity and price Material- fabric | 1 500 metres costing N$20 permetre Direct labour 12 000 hours at a rate of N$30 per hour Administration and selling costs 10% of production costs The following hours will also be needed for the 1000 suits. Direct Labour Hours Machine hours Cutting 1000 200 Sewing 300 500 Finishing 700 200 Budgeted expenses and other details for the year ended 28 February 2020 were as follows: Table 1: Budgeted manufacturing costs and overhead allocation bases. Canteen NS Maintenance NS Total NS 120 000 100000 50 000 90 000 30 000 Cutting NS 50 000 10 000 5 000 ? ? Sewing Finishing Material store NS1 NS NS 30 000 40 000 20 000 20 000 32000 4 000 20 000 - ? ? ? ? 10000 15 000 8000 6000 ? Direct wages (NS) indirect wages (NS) Consumables (NS) Depreciation-Equip. INS) Fuel (NS Heat and light ) Rental and prop. Taxes (NS) Equipment Valve (NS) Number of Employees Floorspaceused (m) Fuel usage Direct labour hours Machine hours Material issues 20.000 60000 100 9000 45 000 300 000 250 30 000 100 100 000 90000 100 100 000 25 9000 30 000 15000 601 100000 100 3000 40 42 000 30 000 151 10000 10000 101 10 2000 1000 10 15 10 50 000 45000 15 It is company policy to allocate/(absorb) manufacturing overheads in the cutting department based on direct labour hours while the manufacturing overheads in the sewing and finishing departments are allocated/(absorbed) based on machine hours. Now assume that the primary apportionment has been correctly done for you as follows: Table 2: Primary allocation of production overheads Total Cutting Sewing NS INSINS Finishing NS Material store Canteen NSINS Maintenance NS Total overheads 330 000 72000 63 000 98 000 42 000 31 500 23 500 Mark 10 Required: Using the primary apportioned overheads in Table 2, and any relevant information from the question including Table 1, perform a secondary overhead apportionment of service departmental overheads to production departments using (i) appropriate basis of apportionment and (ii) applicable method(s) of apportioning service departmental overheads to production departments. Calculate the predeterminedoverhead rates to be used in each of the three production departments. 5.6 Determine the sales value of the 1000 suits ordered. Assuming that for the year ended 28 February 2019 the actual manufacturing overheads for the sewing department were N$110 000, actual machine hours were 14 000 hours and actual direct labour hours were 9 000 hours, calculate the over/under absorption of manufacturing overheads in the sewing departments. Explain how under/over recoveries of overheads arise and why pre-detemined overhead rates are used. Total End of assignment 1: 125 marks QUESTIONS (80 MARKS Bine und produces suits in three separate production departments (ve Cutting Sewing and Finishing Production is serviced by three service centres viz. Material store, Canteen and Maintenance. The Material store cost centres costs are apportioned to other departments using the direct method while the reciprocal method based on simultaneous equations is used to apportion Canteen and Maintenance centres costs. The Maintenance costs are apportioned based on floor area. Itis Bino's policytoset selling prices to ensure a profit margin of 30% on sales. Page 19 of 27 The company received a new order for 1 000 suits which will require the following costs: Cost Material fabric Direct labour Administration and selling costs Quantity and price | 1 500 metres costing N$20 per metre 12000 hours at a rate of NS30 per hour 10% of production costs The following hours will also be needed for the 1000 suits. Finishing Direct Labour Hours Machine hours 1000 700 Sewing 300 500 Budgeted expenses and other details for the yearended 28February 2020 were as follows: Table 1: Budgeted manufacturing costs and overhead allocation bases. Total Cutting Sewing Maastore Canteen Maintenance NS NS NS NS Die 120000 50000 30000 40000 Indirect was INS) 100000 10000 20000 20000 2000110000 0 50000 50001 4 000 20 000 Equip INS) 90 000 300000 100000 60000 10000 10000 10000 2000 1000 30000 100 9000 9000 300 8000 40 90000 15000 45000 30 000 it is company policy to allocate absorb manufacturing overheads in the cutting department based on direct labour hours while the manufacturing overheads in the sewing and finishing departments are allocated/absorbed based on machine hours. Now assume that the primary apportionment has been correctly done for you as follows: Table 2: Primary allocation of production overheads Total NS Cutting NS Sewing NS Finishing NS Material store N$ Canteen N$ Maintenance T N$ Total overheads 330 000 72 000 63 000 | 98000 42 000 31500 | 23 500 Mark 10 Required: Using the primary apportioned overheads in Table 2, and any relevant information from the question including Table 1, perform a secondary overhead apportionment of 5.3 service departmental overheads to production departments using (i) appropriate basis of apportionment and (ii) applicable method(s) of apportioning service departmental overheads to production departments. Calculate the predeterminedoverhead rates to be used in each of the three production departments. 5.6 Determine the sales value of the 1 000 suits ordered. Assuming that for the year ended 28 February 2019 the actual manufacturing overheads for the sewing department were N$110 000, actual machine hours were 14 000 hours and actual direct labour hours were 9 000 hours, calculate the over/under absorption of manufacturing overheads in the sewing departments. Explain how under/over recoveries of overheads arise and why pre-determined 5.8 overhead rates are used. Total 40 End of assignment 1: 125 marks QUESTIONS (40 MARKS) Bino Ltd produces suits in three separate production departments (viz. Cutting Sewing and Finishing Production is serviced by three service centres (viz. Material store, Canteen and Maintenance). The Material store cost centre's costs are apportioned to other departments using the direct method while the reciprocal method based on simultaneous equations is used to apportion Canteen and Maintenance centres' costs. The Maintenance costs are apportioned based on floor area. It is Bino's policy to set selling prices to ensure a profit margin of 30% on sales Page 19 of 27 The company received a new order for 1 000 suits which will require the following costs: Cost Quantity and price Material- fabric | 1 500 metres costing N$20 permetre Direct labour 12 000 hours at a rate of N$30 per hour Administration and selling costs 10% of production costs The following hours will also be needed for the 1000 suits. Direct Labour Hours Machine hours Cutting 1000 200 Sewing 300 500 Finishing 700 200 Budgeted expenses and other details for the year ended 28 February 2020 were as follows: Table 1: Budgeted manufacturing costs and overhead allocation bases. Canteen NS Maintenance NS Total NS 120 000 100000 50 000 90 000 30 000 Cutting NS 50 000 10 000 5 000 ? ? Sewing Finishing Material store NS1 NS NS 30 000 40 000 20 000 20 000 32000 4 000 20 000 - ? ? ? ? 10000 15 000 8000 6000 ? Direct wages (NS) indirect wages (NS) Consumables (NS) Depreciation-Equip. INS) Fuel (NS Heat and light ) Rental and prop. Taxes (NS) Equipment Valve (NS) Number of Employees Floorspaceused (m) Fuel usage Direct labour hours Machine hours Material issues 20.000 60000 100 9000 45 000 300 000 250 30 000 100 100 000 90000 100 100 000 25 9000 30 000 15000 601 100000 100 3000 40 42 000 30 000 151 10000 10000 101 10 2000 1000 10 15 10 50 000 45000 15 It is company policy to allocate/(absorb) manufacturing overheads in the cutting department based on direct labour hours while the manufacturing overheads in the sewing and finishing departments are allocated/(absorbed) based on machine hours. Now assume that the primary apportionment has been correctly done for you as follows: Table 2: Primary allocation of production overheads Total Cutting Sewing NS INSINS Finishing NS Material store Canteen NSINS Maintenance NS Total overheads 330 000 72000 63 000 98 000 42 000 31 500 23 500 Mark 10 Required: Using the primary apportioned overheads in Table 2, and any relevant information from the question including Table 1, perform a secondary overhead apportionment of service departmental overheads to production departments using (i) appropriate basis of apportionment and (ii) applicable method(s) of apportioning service departmental overheads to production departments. Calculate the predeterminedoverhead rates to be used in each of the three production departments. 5.6 Determine the sales value of the 1000 suits ordered. Assuming that for the year ended 28 February 2019 the actual manufacturing overheads for the sewing department were N$110 000, actual machine hours were 14 000 hours and actual direct labour hours were 9 000 hours, calculate the over/under absorption of manufacturing overheads in the sewing departments. Explain how under/over recoveries of overheads arise and why pre-detemined overhead rates are used. Total End of assignment 1: 125 marks