Question

Q.4. Jamestown Company operates with two producing departments, P1 and P2 and two Service departments, S1 and S2. Actual factory overhead before distribution of service department costs, together with the usage of service from the service departments is as follows; Actual Factory Overhead Before Distribution of Services Provided By Department Service Department Costs S1 S2 P1 Rs.25, 000 40% 20% P2 23, 800 50 40 S1 7, 200 40 S2 9,000 10 Total Rs.65,000 100% 100% Required: - 1. Determine the total Factory Overhead (including service department costs) for each producing department, distributing service department costs to producing departments only. 2. Determine the total factory overhead (including service department costs) for each producing department, distributing service department costs stepwise, beginning with S2. After a department's expenses have been distributed no expenses are assigned back to it. 3. Determine the total factory overhead (including service department costs) for each producing department, using the simultaneous method. (4+3+3=10) OR ns Din their ton of the color for onditambo fluon it

Answer 1

1. Statement Showing distribution of total factory overhead (Distributing service departments costs to production department only)
Department	P1	P2	S1	S2
Actual factory overhead before distribution of service department cost	25,000	23,800	7,200	9,000
Allocation of S1 overhead to production department (4:5)	3,200	4,000	(7,200)
Allocation of S2 overhead to production department (2:4)	3,000	6,000		(9,000)
Total	31,200	33,800	-	-
2. Statement Showing distribution of total factory overhead (Stepwise cost distribution)
Department	P1	P2	S1	S2
Actual factory overhead before distribution of service department cost	25,000	23,800	7,200	9,000
Allocation of S2 overhead to production department (2:4:4)	1,800	3,600	3,600	(9,000)
	26,800	27,400	10,800	-
Allocation of S1 overhead to production department (4:5)	4,800	6,000	(10,800)
Total	31,600	33,400	-	-

3. Distribution of total factory overhead using Simultaneous Method

Assuming A is the Service department S1 expenses and B is the Service department S2 expenses

Then,

A = Rs. 7200 + 0.4B

B = Rs. 9000 + 0.1A

Subtracting the value of A,

B = Rs. 9000 + 0.1 (Rs. 7200 + 0.4B)

B = Rs. 9000 + Rs. 720 + 0.04B

B - 0.04B = Rs. 9720

B = Rs. 10125

The total expenses of S2 are Rs. 10125 and that of the S1 is Rs. 11250

Statement Showing distribution of total factory overhead using Simultaneous Method
Department	P1	P2
Actual factory overhead before distribution of service department cost	25,000	23,800
Allocation of S1 overhead to production department (40% and 50% of Rs. 11250)	4,500	5,625
Allocation of S2 overhead to production department (20% and 40% of Rs. 10125)	2,025	4,050
Total	31,525	33,475