Question
The Production Manager of ACE Productions provided the following budgeted information for each department. Additionally, there are two service departments: Stores and Maintenance. The following
The Production Manager of ACE Productions provided the following budgeted information for
each department. Additionally, there are two service departments: Stores and Maintenance. The
following data below are the budgeted data for the same period:
A B C Maintenance Stores
Indirect Labour $5,062,500 $2,531,250 $4,218,750 $1,350,000 $1,687,500
Indirect Materials $1,012,500 $843,750 $2,531,250 $2,025,000 $2,362,500
Other Expenses $2,700,000 $3,375,000 $1,687,500 $675,000 $2,700,000
Labour hours 525,000 270,000 675,000
Machine hours 337,500 506,250 843,750
Below are the actual overhead and actual activities for the three (3) production departments at
General's Ltd for the year ended August 2018.
A B C
Indirect Labour $5,062,500 $675,000 $1,012,500
Indirect Materials $1,687,500 $1,012,500 $2,362,500
Other Expenses $3,375,000 $5,062,500 $4,218,750
Labour hours 687,500 337,500 843,750
Machine hours 337,500 675,000 1,012,500
Overhead is absorbed based on how intensive the individual departments are considered. It
has been estimated that service department usage is as follows:
A B C Maintenance Stores
Maintenance 30% 45% 15% - 10%
Stores 60% 15% 20% 5% -
Required:
a. how do a schedule to apportion the notional service cost to production and the total
overheads for the production departments after apportionment. Hint: use simultaneous
equations to derive the notional values. [16 marks]
b. Calculate the overhead absorbed in each department. [3 marks]
c. Calculate the under/over absorbed overheads for each department. [3 marks]
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