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QUESTION SIX (Groups 3 and 15) Bakare Ltd has two production departments, X and Y, and two service departments Stores and General Services The company
QUESTION SIX (Groups 3 and 15) Bakare Ltd has two production departments, X and Y, and two service departments Stores and General Services The company has budgeted the following costs for the forthcoming period Maintenance Depreciation of equipment Plant insurance Heat and light Canteen costs Rent Supervision The following information is also available '000 100 58 58 75 24 50 120 Stores 2,500 10 General 2,500 10 K50,000 20% Floor Area m2 Employees Plant book value Depreciation per annum 25% Machine Hours Direct Material usage Overheads are absorbed in both production departments on a Machine Hour basis Required (a) Prepare an overhead analysis sheet for the period, using suitable bases of apportionment. 10,000 40 K100,000 K100,000 K40,000 10,000 20 15% 20% 60,000 40,000 K200,000 K300,000 (10 marks) (b) Calculate the absorption rates for each department. At the end of the period the actual results were as follows (4 marks) Actual Overheads Actual Machine Hours 58,800 (c) State the factors that cause an under or over absorption of overheads. (2 marks) (d) For each of departments X and Y, calculate the under or over absorbed overhead K267,100 K220,100 40,500 analysed under the headings given in (b) above (6 marks) (e) State briefly the treatment of under and over absorbed overhead in the cost (3 marks) accounts
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