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
The Cutting Department of the Rock Island Custom Cabinetry Corporation (a process costing production) had no work in process at the beginning of the period, 12,000 units were compl

Single Limiting Factor Where a single limiting factor exists for the decision making sequence may be implemented given as:- - Compute the contribution per unit of limiting

Vincent Ltd operates solely in Western Australia and the chief operating decision maker has identified five operating segments: Mining, Insurance, Retailing, Manufacturing and Tran

Winston Duff is planning to borrow $225,000 to purchase a new home. Mr. Duff is considering two fixed-rate financing alternatives offered by Horsepen Creek State Bank. The first

A firm uses capital and labor to produce a single output good. The production function is given by F(K, L) = K 2 L where K is the amount of capital and L is the amount of labor em


First In First Out or FIFO Method - Work in Progress This method considers merely those costs incurred throughout the recent period.  Equivalent units are calculated given a

Batch Costing This is a kind of job costing that is utilized when production consists of limited repetitive work and definite number of item manufactured in one batch.  A batc

The balance sheet and income statement for Bingle Ltd is presented to you as follows: Balance Sheet Extract as at 30 June 2012 with comparatives

Moore Corporation follows a policy of a 10% depreciation charge per year on all machinery and a 5% depreciation charge per year on buildings (the corporation uses the nearest full