Question

Question 1 The Yummy Confectionery has two main production departments and two service departments. Production Departments 1. Melting 2. Cooling Service Departments 1. Maintenance 2. Quality Assurance The total production overhead for a year is as below RM Depreciation of machines Lighting Rental of factory Supervisors' salaries 660,000 300,000 72,000 84.000 1,116,000 The following information is also available: Melting Department Cooling Department Maintenance Quality Department Assurance Department Number of employees Machines (hours) Floor areas (Square meters) 50 300,000 20,000 30 200,000 13,000 Nil 3,000 Nil 4,000 Required: (a) Apportion and reapportion all production overhead to production departments. (b) Melting and Cooling departments are machine intensive. Compute the production overhead absorption rates for both departments (Simplify your answer to 2 decimal places).

Answer 1

(a) Apportion of overhead costs

Depreciation of Machine 660,000
Depreciation of machinery is apportioned on the basis of machine hours.
Total number of machine hours- 500,000
Total Cost- 660,000
Cost per machine hour= 660,000/500,000= 1.32 per machine hour
Total depreciation cost in melting department= 396,000

Total depreciation cost in cooling department= 264,000

Lighting 300,000
Lighting is apportioned on the basis of machine hours.
Total number of machine hours- 500,000
Total Cost- 300,000
Cost per machine hour= 300,000/500,000= 0.6 per machine hour
Total lightning cost in melting department= 180,000

Total lightning cost in cooling department= 120,000

Rental of factory 72000

Factory rent is apportioned on the basis of floor space
Total floor space= 40,000

Total Cost- 72,000
Cost per floor space= 72,000/40,000= 1.8 per floor space
Total rental cost in melting department= 36,000

Total rental cost in cooling department= 23,400

Total rental cost in maintenance department= 5,400

Total rental cost in quality department= 7,200

Supervisors salary= 84,000
Apportioned on the basis of number of employees
Total employees= 100
Cost per employee= 840

Total Supervisor salary in melting department= 42,000

Total Supervisor salary in cooling department= 25.200

Total Supervisor salary in maintenance department= 8400

Total Supervisor salary in quality department= 8400

(b) Total cost apportioned in Melting and Cooling department

	Melting	Cooling
Depreciation	396,000	264,000
Lightening	180,000	120,000
Rent	36,000	23,400
Supervisors salary	42,000	25,200
Total	654,000	432,600
Machine Hours	300000	200000
Cost per hour	2.18	2.163