Question

a company makes a range of products with total budgeted manufacturing overheads of $900,000 incurred in three production (a,b, and c) and one service department.

department a has 11 direct employees who each work 35 hours per week. department b has 7 machines each of which is operated for 24 hours per week. department c is expected to produce 148,000 units of final product in the budget period.the company will operate for 50 weeks in the budget period.budgeted overheads incurred directly by each department are:

production department a $261,745

department b $226,120

department c $93,890

service department d $53,305

the balance of budgeted overheads are apportioned to departments as follows:

production department a 40%

production department b 35%

production department c 20%

service department d 5%

service department overheads are apportioned equally to each production department require:

(a)calculate an appropriate predetermined overhead absorption rate in each production department.

(b)calculate the manufacturing overhead cost per unit of finished product in batch of 100 units which take nine direct labour hours in department a and three machine hours in department b to produce.,

Answer 1

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A company
Calculation of overheads to be apportioned:	Amount $	Note
Total budgeted manufacturing overhead	900,000.00
Less: incurred directly by each department
Production department a	261,745.00
Production department b	226,120.00
Production department c	93,890.00
Service department	53,305.00
Overheads to be apportioned:	264,940.00	A
Apportionment of remaining overheads:	Dept. a	Dept. b	Dept. c	Service	Total	Note
Ratio	40%	35%	20%	5%	100%	B
Overheads apportioned:	105,976.00	92,729.00	52,988.00	13,247.00	264,940.00	C=B*A
Apportionment of Service dept. overhead	Amount $	Note
Overhead incurred directly	53,305.00
Overhead apportioned	13,247.00	See C
Total Overhead	66,552.00	D
Share of each production department	22,184.00	E=D/3
Total overhead of each production dept.	Dept. a	Dept. b	Dept. c	Total	Note
Overhead incurred directly	261,745.00	226,120.00	93,890.00	581,755.00
Overhead apportioned	105,976.00	92,729.00	52,988.00	251,693.00	See C
Share of Service dept. overhead	22,184.00	22,184.00	22,184.00	66,552.00	See E
Total overhead of each production dept.	389,905.00	341,033.00	169,062.00	900,000.00	F
Total labor hours of dept. a.		Note
Number of employees	11.00	G
Hours worked per week by each employee	35.00	H
Total labor hours worked per week	385.00	I=G*H
Number of weeks operated	50.00	J
Total labor hours worked	19,250.00	K=I*J
Answer a
Predetermined overhead absorption rate in department a	20.25	L=F/K
Total machine hours of dept. b.		Note
Number of machines	7.00	M
Hours operated per week by each machine	24.00	N
Total hours operated in a week	168.00	O=M*N
Number of weeks operated	50.00	P
Total labor hours worked	8,400.00	Q=O*P
Answer a
Predetermined overhead absorption rate in department b	40.60	R=F/Q
Answer a
Number of units produced in dept. c.	148,000.00	S
Predetermined overhead absorption rate in department c	1.14	T=F/S
Answer b	Dept. a	Dept. b	Dept. c	Total	Note
Activities used	11.00	3.00	100.00		U
Predetermined overhead absorption rate	20.25	40.60	1.14		See L, R, T
Allocated manufacturing overhead	222.80	121.80	114.23	458.83	This is Activities used* Predetermined overhead absorption rate.
Total units				100.00
Manufacturing overhead cost per unit of finished product				4.59	This is Allocated manufacturing overhead/ Total units.