Calculate capacity ratio and efficiency ratio, Cost Accounting

Woodall Ltd has two production departments, X and Y. For month 2, the company budgets its overhead costs as:

 

X

Y

Variable overhead

$23,000

$42,000

Fixed overhead

$18,000

$18,000

The absorption rate is based on labour hours in each department. The budgeted hours in each department are 5,000 for X and 8,000 for Y.

 At the end of month 2, department X had actually worked 4,900 hours, and department Y had worked 8,200 hours, and the standard hours produced were 5,200 in Department X and 8,100 in Department Y.

The actual expenditure on overhead for the month was:

Department X $42,500                            Department Y $59,500

 Required

(a) Calculate the under/over absorption of overhead in both of departments X and Y.

(b) State the factors that give rise to the under/over absorption of overhead.

(c) Analyse your answer to (a) above under the headings stated in b) above.

(d) State what is meant by the term "standard hour".

(e) For each of departments X and Y, calculate the following:

(i) Capacity Ratio,

(ii) Efficiency Ratio

(iii) Activity (Production Volume) Ratio

Posted Date: 2/26/2013 7:10:45 AM | Location : United States







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