Calculate an appropriate absorption rate, Cost Accounting

Three of the cost items that are included in the production overhead for a factory for a period are:

Machine maintenance labour

$33,600

Power

$26,000

Rent and rates

$39,800

Production overheads are currently absorbed using a single factory-wide rate.

It has been suggested that a separate overhead absorption rate should be calculated for each of the three groups of machines in the factory. The following additional budgeted data has been collected for the period:

 

Machine Group

Total

 

MG1

MG2

MG3

Floor area (m2)

1,600

1,400

1,000

4,000

Machine values (

000)

 

320

250

230

800

Kilowatt hours ('000)

220

110

110

440

Machine maintenance (labour  hours)

600

400

600

1,600

Number of indirect workers

4

4

2

10

Machine hours

8,200

5,600

4,900

18,700

Required

(b)   Briefly explain one reason why a separate overhead absorption rate for each machine group would be preferable to a single factory-wide rate.

(c)    Apportion each of the three items of budgeted overhead cost (machine maintenance labour, power and rent and rates) to the three machine groups.

The totals of all budgeted  production overhead cost items, allocated and apportioned to the three machine groups, are as follows:

MG1

$129,560

MG2

$107,520

MG3

$119,070

 Required

(c)    Calculate an appropriate absorption rate for each machine group.

(d)   Calculate the production overhead that would be charged to job 121which requires five hours on MG1 machines two hours on MG2 machines and three hours on MG3 machines.

Posted Date: 2/26/2013 7:09:32 AM | Location : United States







Related Discussions:- Calculate an appropriate absorption rate, Assignment Help, Ask Question on Calculate an appropriate absorption rate, Get Answer, Expert's Help, Calculate an appropriate absorption rate Discussions

Write discussion on Calculate an appropriate absorption rate
Your posts are moderated
Related Questions
explain fully the concept of the cost.how does cost accounting contribute to the effective and efficent management of an industrial established?

Disadvantages of Standard Costing 1. The system of standard costing is very expensive to install : A lot of money is spent in studying output requirements in terms of materia

Sensitivity Analysis The only certain thing is that nothing is sure thing. Cost structures can be anticipated to vary over the time period. Management should vigilantly analyze

A provision must be made in advance for those debts whose recovery is uncertain and to writing off bad debts. Each enterprise, depends on their past experience, make a provision fo

Cash is the other form of fund although in a narrow sense, this refers to a supply which can be drawn upon as per to the need. Here the term cash involves both cash and cash equiva

Hello, I''m currently doing a research on a company and planning an Activity Based Costing system since the company is using Traditional Costing system to allocate the overhead to


types of computerized packages .its cost .features size of the business is intended to service

Purposes of standard cost accounting connection - suppose you were a management consultant and the client asked you the advantages and disadvantages of using standard costs and cos

You are provided with the subsequent information relating to Cello Ltd. The accountant is currently preparing the budget for the next three months ending 30 June 2010.