Question

Question 3 Blue Ltd a manufacturing business with three production departments and one service department and has budgeted costs by department as follows: Dept Dept2 Depr3 Stores 320 480 200 Direct labour (£000) 240 280 240 Indirect labour (£000) 320 Production Requisition notes (000's) 120 160 40 Indirect materials (£000) 30,000 30,000 20,000 10,000 Area occupied (sqm) 20 70 10 Use of external maintenance (%) 40 The following additional information is available: • Total external maintenance costs will be £25,000 Components are held in stores until they are needed by the production departments, who obtain such on presentation of an authorised requisition note to the store staff. • All direct labour is paid £5 per hour. • Dept 3 has machine intensive production with 80,000 machine hours. • Other costs for the coming year comprise: £000s Heating & lighting utilities 160 Rent 300 Property insurance 10 Required: (a) Allocate and apportion overheads to the three Production Departments: (a) Deduce appropriate overhead absorption rates for each department (b) ) Green Ltd have been asked to quote for the following job. Direct labour hours: Dept.1 Dept.2 Dept.3 10 hours 4 hours 2 hours Machine hours Dept 3 Direct materials: Dept.1 Dept.2 Dept.3 Calculate the manufacturing cost of this job. 4hours £120 £18 £8

Answer 1

first page

Question 3 overheads and apportionment Allocation tin ooo's Dept 2 Dept 3 Stores Particulars Depti 480 • 200 320 Oireet tabou egiven) 400 Machine labour (winol) 40 40 160 120 2.5 • Indirect material (given) • External mount tenence cost I (win. 2) 5 17.5 35.55 17.77 53.33 53.33 Heat & lighting (win. 3) Reut 33.33 • 66.66 LOO LOO 2.22 Property 1.11 3.33 Irsmena 3.33 Total 0.HT 801.66 614.16 92.21 #46.93 Notes Widol :- Machine hows 80000 given a = 5€ cost pu how :. For 80000 hows - 80000 85 400 000 €

second page

Calculation of manufacturing cost of job Green Ltd. Particulay Repti I Dept 2 I Dept 3 I 20 L 10 Direct labour I 50 Lost (t) Machine Lost 20 Dieeet materials 120 18 Total 170 38 Total manufacturing cost cost acturing of of is 170+3873 job you 246€ Note :- Griven, in question that labour cost per how 15 € 5.

third page

Won 2 Lost us distributed External maintence the basis of of eve of percentage external maintanence. Its no win.3 rent and like heat & lighting Other last on are distributed insurance Property the basis of area alto state of overheads, disteibution econdary Department Total Basic DS Basic Она сол allocation 2 801 GG I 614. It L 746.93 162.75 Distribution of stares to Df, De, os 92,21 6:2:1 61.47 20.49 10.25 1 2 254.96 863.13 1 634.65 757.18 1

calculation of overhead absception vale » overhead labou Overhead rate how is calculated by using direct as the basis. Total overhead & suitable base I 0.4 rate = - Total OH į Direct labour... Partieulan Ratio Dept Dept 2 Dept 3 Total o.u 48:32:60 773.13 (€2254.96). 515042 966.41 - Machine hours is also considered