Question

40.000 MACO1US Assignment Two Mange preparing overhead tutor a forthcoming period The company has three production departments. Add service departments, X and Y The following figures have been produced in N с Y Overhead cost 40 000 42.000 42.000 Machine hours 16.000 12,000 13,000 Overhead is absorbed on a machine hour basis It has been estimated that service department usage is as follows: A X Y Department 20% 10 409 Department 30% 30% 20% 20% Required: (a) Define Overhead allocation: (4) Overhead apportionment. 30 (4 marks (b) Prepare a schedule of the overhead costs to be charged to departments A, B and C. using the repeated distribution method to apportion the service department costs to the production departments (Work to the nearest NS) (8 marks) (c) Calculate the overhead absorption rates for the period for departments A, B and C (Work to the nearest NS) (6 marks) (d) State why hourly rates are generally accepted to be the most appropriate method of overhead absorption, and comment upon other methods that may be used (5 marks) (e) State another method (other than repeated distribution) that could be used for the reapportionment of service department costs over production departments (2 marks) (Total 25 marks) Due Date: 16 September 2020

Answer 1

Answer @ Overhead allocation Allocation of overheads means the allotment " of whole items of Cost to Cost centres or Cost units. Charging of expenses which can be identified wholly with a pasticules departments overhead A Appostionment It means allotment of expenses which cannot be charged a pashiulas depastmacot. The allotment of proportion of items of cost to Cast centres. Re-appostonment Repeated Distribubon method Service Dep Pockthorn PP ovelhead to 6 of overhead B х y Total of overhead 40,000 42000 45000 40000 42000 ادو Re-distribution of Servce Dep. 12 000 *231; -4 S000 y 3:32:2:- 17400 19400 X-2:31:42 320 3480 y 3:32:2 - 1392 1392 x 2:3:1-4 186 278 4 3:3 2:2 2:23.1-15 22 9:3:32:2:- 9 ។ X: 2: 3.1-4 3 2 69436 76694 canned with 4600 20,000 16000 1600 11 600 58000 1160 (11600) 4 640 928 1928 (4640) 93 (928) 371 75 74 371) 7 (74) 30 (30) 6 6 1 6 2870 NIL NIL

each Dep! Goverhead absoeption rate Overhead f 남 Machine hows Dep' A = 69436 .-4.63 Dep B = 76494 15000 12000 6.4 Depl C = 62870 4.8 13000 Hourly rate of machines are . generely accepted as the most appropriate method of % Overhead apsolphion. Other methods echters production hour rates, which popularly sused Another method to be used re-apportion- of service depl to production Department 1. Simultaneous equation method 2. Step or step Ladder method. ment