Question
QUESTION OF MANAGEMENT ACCOUNTING ANSWER ALL QUESTIONS WITH REFERENCE TO RELEVAN MODELS Allocation of costs and overhead rates Wits Engineering (Pty) Ltd, situated in South
QUESTION OF MANAGEMENT ACCOUNTING
ANSWER ALL QUESTIONS WITH REFERENCE TO RELEVAN MODELS
Allocation of costs and overhead rates Wits Engineering (Pty) Ltd, situated in South Africa, has budgeted for the following production overheads for its production and service cost centres for the coming year: Cost centre R Machining 180 000 Assembly 160 000 Paint shop 130 000 Engineering shop 84 000 Stores 52 000 Canteen 75 000
The product passes through the machining, assembly and paint shop cost centres and the following data relates to the cost centres:
Machining Assembly Paint shop Engineering shop Stores No. of employees 81 51 39 30 24
Engineering 18 000 12 000 10 000 shop number of service hours
Stores 180 135 90 45 number of orders
The following budgeted data relates to the production cost centres:
Machining Assembly Paint shop Machine hours 9 200 8 100 6 600 Labour hours 8 300 11 250 9 000 Labour cost (R) 40 000 88 000 45 000 REQUIRED: (a) Apportion the production overhead costs of the service cost centres to the production cost centres and determine predetermined overhead absorption rates for the 3 production cost centres on the following basis: Machining - Machine hours. Assembly - Labour hours. Paint shop - Labour costs.
(b) Actual results for the production cost centres were: Machining Assembly Paint shop Machine hours 10 000 8 200 6 600 Labour hours 4 500 7 800 6 900 Labour cost (R) 25 000 42 000 35 000 Actual overheads (R) 290 000 167 000 155 000
Prepare a statement showing the under/over absorption per cost centre for the period under review.
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