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

Factors affecting share prices, Factors Affecting Share Prices The ent...

Factors Affecting Share Prices The entire sorts of influences affect share prices. These influences involves as: 1. The current profit record of the company particularly th

Financial markets, term paper about financial markets in pakistan

term paper about financial markets in pakistan

Valuation of securities, Valuation of Securities The previous methods ...

Valuation of Securities The previous methods were perfect for valuing the entire business however it is also essential to ascertain the value of part of a business namely shar

Explain the term - giving margin money to broker, Explain the Giving Margi...

Explain the Giving Margin Money to Broker Marin  is  the  amount  of  money  which is provided  by customer to the brokers who have agreed to trade their securities. It may

Advantages of overdraft finance, Advantages of Overdraft Finance ...

Advantages of Overdraft Finance 1. It is useful in financial crisis such an accountant cannot forecast because of abrupt fall in profits so liquidity problems. 2. In

Maintain highest degree of accuracy, How can you maintain highest degree of...

How can you maintain highest degree of accuracy in reporting? For maintaining the highest degree of accuracy in reporting, we need to use the same chart of accounts being used

Calculate the retrospective gross premium reserve, Question: A deferred...

Question: A deferred annuity policy is sold to a life aged 45 with the following benefits: • Basic payments start at $30,000 from age 65, increasing by $2,000 each year; •

Calculate the value of the company with borrowing, Suppose the ABC Corporat...

Suppose the ABC Corporation is currently all-equity financed and would like to increase its value by issuing debt. The firm has annual earnings before interest and taxes of $7,0

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