Question
ZidronEnterprises has3productioncentres(MachinecentreA,MachinecentreBandanAssemblycentre).Italsohastwo(2)servicecentres(MaterialsprocurementandGeneralmanufacturingsupport). Thefollowinginformationontheannualoverheadcostsisavailable: R Indirectmaterials: MachinecentreA 250000 MachinecentreB 402500 Assembly 52500 Materialsprocurement 0 Generalmanufacturingsupport 5000 Indirectlabour: MachinecentreA 500000 MachinecentreB 500000 Assembly 750000 Materialsprocurement 550000 Generalmanufacturingsupport
ZidronEnterpriseshas3productioncentres(MachinecentreA,MachinecentreBandanAssemblycentre).Italsohastwo(2)servicecentres(MaterialsprocurementandGeneralmanufacturingsupport).
Thefollowinginformationontheannualoverheadcostsisavailable:
| R | |
| Indirectmaterials: MachinecentreA | 250000 |
| MachinecentreB | 402500 |
| Assembly | 52500 |
| Materialsprocurement | 0 |
| Generalmanufacturingsupport | 5000 |
| Indirectlabour: MachinecentreA | 500000 |
| MachinecentreB | 500000 |
| Assembly | 750000 |
| Materialsprocurement | 550000 |
| Generalmanufacturingsupport | 740000 |
| Heatingandlighting | 250000 |
| Propertytax | 500000 |
| Insuranceofmachinery | 75000 |
| Depreciationofmachinery | 750000 |
| Insuranceofbuildings | 125000 |
| Salariesofworksmanagement | 400000 |
| Carryingvalueofmachinery | Areaoccupied(m2) | Numberofemployees | Directlabourhours | Machinehours | |
| MachinecentreA | R4000000 | 5000 | 150 | 500000 | 1000000 |
| MachinecentreB | 2500000 | 2500 | 100 | 500000 | 500000 |
| Assembly | 500000 | 7500 | 150 | 1000000 | |
| Stores | 250000 | 7500 | 50 | ||
| Maintenance | 250000 | 2500 | 50 | ||
| R7500000 | 25000 | 500 |
Totalmaterialsissues(bothdirectandindirect)totheproductioncentresareasfollows:
| MachinecentreA | R2000000 |
| MachinecentreB | 1500000 |
| Assembly | 500000 |
| R4000000 |
Secondaryallocation:Thevalueofmaterialsissuedisusedasabasisforthematerialsprocurementcostcentre.Thedirectlabourhoursisusedasthebasisforthegeneralmanufacturingsupportcostcentre.
ProductXisproducedinbatchesof100.Eachunitspends5hoursintheMachinecentreA,10hoursinMachinecentreBand10hoursintheAssemblycentre.
Required:
- Usingthetraditionalcostingapproach,prepareanoverheadallocationstatement. (8)
- Calculatetheallocationrateforeachoftheproductioncentres,basedonmachinehoursforMachinecentresAandBanddirectlabourhoursforassembly. (3)
- Usingtheallocationratescalculatedin3.2,calculatetheoverheadsappliedtoeachbatchofProductX. (4)
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Management Control Systems
Authors: Frank G.H. Hartmann Professor, Kalle Kraus, Göran Nilsson, Robert N. Anthony, Vijay Govindarajan
2nd Edition
