Calculate the overhead absorption rates, Finance Basics

Assignment Help:

A manufacturing organisation has three production cost centres, the cutting department, the processing department and the finishing department, and two service cost centres, the stores and the canteen.

Budgeted information for the following 6 month period is available as follows:

                                                                        £

Direct materials                                           155,200

Direct labour                  

          Cutting                           15,000

          Processing                      35,000

          Finishing                         10,000

          Canteen                          6,240           66,240       

Indirect materials

Cutting                           25,500

Processing                      10,200

Finishing                           7,300

Stores                                        3,000

Canteen                            2,200         48,200

Indirect labour

Cutting                             4,200

Processing                      10,500

Finishing                           3,000

Stores                                      12,800

Canteen                            4,500       35,000

Rent                                                            12,000

Supervisor's wages                                        12,000

Machinery insurance                                       3,300

Maintenance expenses                                   5,400

The following information is also provided:

 

Total

Cutting

Process'g

Finish'g

Stores

Canteen

Direct labour hours

8,600

2,730

4,550

1,320

-

-

Direct machine hours

11,100

6,500

1,900

2,700

-

-

Floor area

(sq m)

50,000

20,000

18,000

8,000

2,000

2,000

Maintenance hours

 

1,100

400

400

100

100

100

Materials requisitions

1,800

1,200

300

300

-

-

Number of employees

90

20

35

20

5

10

Supervisor's time in each department (hours)

 

960

 

480

 

360

 

90

 

30

 

0

Value of machinery

£150,000

£60,000

£50,000

£30,000

£5,000

£5,000

You are required to:

  1. Create an overhead schedule to show the allocation/ apportionment of the overheads to each of the production and service cost centres.  Show all figures to the nearest whole £.
  2. Reapportion the service cost centre costs to the production cost centres, again showing all figures to the nearest whole £.
  3. Having collected all of the overheads in the production cost centres, calculate the overhead absorption rates for each cost centre, to two decimal places.
  4. Explain how these absorption rates will be used to charge the overheads into production and what adjustments may be required once the actual overhead figures are available.

Related Discussions:- Calculate the overhead absorption rates

Retirement, Ask quQUESTION 1 1. In the ratio test used to determine whether...

Ask quQUESTION 1 1. In the ratio test used to determine whether a qualified plan is nondiscriminatory, what is the minimum percentage of nonhighly compensated employees who must be

Cost of retaining finance, Cost of Retaining Finance This will contain...

Cost of Retaining Finance This will contains dividends for share capital and interest for debt finance or can say tax deducted or like effective cost of debt.  Though, when co

Determine market price of a share, What is the market price of a share of s...

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?  market price of a share

Financial markets-securities and financial intermediaries, Describe the str...

Describe the structure of financial systems with financial markets, securities and financial intermediaries. By a structural point of view a financial system can be considered

Debt finance, Debt Finance Debt finance is a fixed return finance like...

Debt Finance Debt finance is a fixed return finance like the cost as interest is fixed on the par value as face value of debt. This is ideal to require if there's a strong equ

Calculate average price-earnings ratio, Regan Inc., was founded nine years ...

Regan Inc., was founded nine years ago by brother and sister Carrington and Genevieve Regan. The company manufactures and installs commercial heating, ventilation, and cooling (HVA

Market model - methods of computing cost of capital, Market Model - Methods...

Market Model - Methods of Computing Cost of Capital This model is utilized to establish the percentage cost of ordinary share capital cost of equity (K e ). If an investor is

Unbiased Expectations Theory, What is the one-year Treasury security rate o...

What is the one-year Treasury security rate of 1R1? For 1R3=11%, E(2r1)= 4% and E(3r1)=5%

Assignment, Discuss the applicabilty of an operating cycle to poultry busin...

Discuss the applicabilty of an operating cycle to poultry business(consider broilers)

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd