QUESTION THREE A.

The Inground Sprinkler Supply sells sprinkler systems suited for large or small yards. Last year the company incurred K1,000,000 in overhead costs related to the following activities: Activity Cost Allocation Base Overhead Purchasing Number of purchase orders K350,000 Material handling number of shipments received K200,000 Quality inspection number of inspections 450,000 The activities for large and small yard systems were as follows: Large Small purchase orders 15,000 20,000 shipments received 7,500 12,500 inspections 11,500 11,000 If a customer requested a bid on a specially designed sprinkler that would probably require four inspections, how much quality inspection overhead would you include in the bid? [10 Marks] B. A factory consists of two production cost centres (P and Q) and two service cost centres (X and Y). The total allocated and apportioned overhead for each is as follows: P Q X Y K95,000 K82,000 K46,000 K30,000 It has been estimated that each service cost centre does work for other cost centres in the following proportions: P Q X Y Percentage of service cost centre X to 50 50 -- Percentage of service cost centre Y to 0 60 10 Required: Show the reapportionment of service cost centre costs to other cost centers and calculate the total overheads to the production cost centres. [10 Marks] C. A company uses an overhead absorption rate of K3.50 per machine hour, based on 32,000 budgeted machine hours for the period. During the same period the actual total overhead expenditure amounted to K108,875 and 30,000 machine hours were recorded on actual production. Calculate the total overhead under or over absorbed for the period. [5 Marks] [Total: 25 Marks]