You are the Cost Accountant of an industrial concern and have been assigned the duty of preparing
Question:
You are the Cost Accountant of an industrial concern and have been assigned the duty of preparing a cost accounting system. Initially it has been decided to prepare three production cost centers and two service cost centers.
The subsequent data relating to the next accounting period have been estimated as follows:
Production Cost Centres
Service Cost Centres
Milling
Assembly
Spraying
Stores
Maintenance
Total
No. of employees
30
75
25
6
14
150
Labour hours
1,510
3,320
950
252
595
6,627
Plant & Machines values
225,000
75,000
45,000
17,000
85,000
447,000
Area (m2)
7,500
10,000
3,500
500
1,000
22,500
Material requisitions
1,400
300
250
550
2,500
Maintenance hours (minor works)
75
30
45
150
KWH ('000)
300
70
50
10
170
600
Machine hours
8,400
1,100
300
9,800
During the period the following data were recorded
Milling
Assembly
Spraying
Stores
Maintenance
Total ($)
Indirect materials
Indirect labour
Maintenance works
2,500
5,250
18,500
1,000
2,500
7,500
1,500
2,250
4,500
300
4,250
1,700
11,750
7,000
26,000
30,500
The following details were obtained from the accounts relating to the period:
Fire insurance
$1,250
Power
$4,500
Heating $ Lighting
$2,000
Rent & Rates
$1,800
Machine depreciation
$8,400
Machine insurance
$850
Canteen deficit
$4,250
Balance of maintenance costs (excluding major works)
$17,500
Required:
a) overhead analysis sheet showing how overhead costs should be apportioned between the departments. (14 marks)
b)Determine suitable overhead absorption rates for the Milling, Spraying and Assembly departments, stating clearly the overhead absorption basis used. (06 marks)
Total, 20 marks
Expert Answer:
