Question
ZABZUGU TATALE produces a specialized product KANZO . The product passes through three (3) cost centers namely: machining, assembly and painting shop. Data relating to
ZABZUGU TATALE produces a specialized product KANZO. The product passes through three (3) cost centers namely: machining, assembly and painting shop. Data relating to the cost centers is as below:
| Machining | Assembly | Painting shop | Engineering shop | Stores |
Number of employees | 81 | 51 | 39 | 30 | 24 |
Engineering shop-service | 18,000 | 12,000 | 10,000 | - | - |
Stores (orders) | 180 | 135 | 90 | 45 | - |
At a management meeting dated 24th September 20X0, the following overheads were budgeted for the production and service cost centers exclusively for the ensuing period:
Cost centers | GHS 000 |
Machining | 180,000 |
Assembly | 160,000 |
Painting shop | 130,000 |
Engineering shop | 84,000 |
Stores | 52,000 |
Canteen | 75,000 |
Equally, the following budgeted data relates to the production cost centers:
| Machining | Assembly | Painting shop |
Machine hours | 9,200 | 8,100 | 6,600 |
Labor hours | 8,300 | 11,250 | 9,000 |
Labor cost (GHS) | 40,000 | 88,000 | 45,000 |
Actual results for the production cost centers were:
| Machining | Assembly | Painting shop |
Machine hours | 10,000 | 8,200 | 6,600 |
Labor hours | 4,500 | 7,800 | 6,900 |
Labor cost (GHS) | 25,000 | 42,000 | 35,000 |
Actual overheads (GHS) | 290,000 | 167,000 | 155,000 |
Required:
- Apportion the production overhead costs of the service cost centers to the production cost centers and determine predetermined overhead absorption rates for the three (3) production cost centers on the following basis:
Machining - Machine hours.
Assembly - Labor hours.
Paint shop - Labor costs.
- Prepare a statement showing the under/over absorption per cost center for the period under review.
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