Prepare a statement to show the total production overheads

Assignment Help Managerial Accounting

Reference no: EM133554663

Problem

Driscoll Masters PLC uses a system of absorption costing. The product passes through a machining department and an assembly department before it is completed.

The machining department is capital intensive; the assembly department is labour intensive.

The company cost accountant has estimated the following overhead costs for the financial year ended 31 January 1998.

Costs: ($)
Electricity: power	62,000
heating and lighting	14,000
Supervisory wages	54,000
Rent and rates	21,000
Insurance: Machinery	61,740
premises	7,000
Depreciation of machinery	41,850

The following information should be used to determine the appropriate basis of appotionment for the year.

The proportion of work done by the service departments is estimated to be: Machining (%) Assembly ($) Maintenance (%) Canteen (%)

Machining (%) Assembly ($) Maintenance (%) Canteen (%)

Maintenance 65 25 10

Canteen 25 75

It is company policy to apportion the maintenance department's costs between the other three departMcnfs to eliminate those costs before apportioning the canteen costs between the production departments.

REQUIRED:

1. Prepare a statement to show the total production overheads for each production department. Please note that service department costs are to be apportioned over to the production departmenfs (Work to the nearest dollar showing the basis of apportionment selected for each cost.)

2. Calculate (to the nearest penny) an overhead absorption rate for each production department.

Reference no: EM133554663

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