Question

Maqbool Ltd. produces Cloth Bags in Two Producing Departments (Cutting & Sewing).

Its also has two support departments namely Personnel & Maintenance. Budgeted data

pertaining to these departments is as under:

Support Departments Producing Departments

Personnel Power Cutting Sewing

Amount in Pak Rupees

Factory Overhead 235,000 255,000 300,000 450,000

Wages - 150,000 350,000 425,000

Kilo Watt Hours 8,000 - 20,000 50,000

Direct Labor Hours - - 25,000 35,000

Cost of Personnel Department is allocated on the basis of wages while the cost of Power

Department is allocated on the basis of Kilo Watt Hours.

Required.

1. Allocate the overhead costs of the support departments to the producing departments

using the reciprocal method.

2. Using direct labor hours, compute departmental overhead rates.