(a) Explain the difference between the terms overhead allotment, overhead apportionment and overhead absorption.

(b) Why are estimated figures used in calculating overhead absorption rates?

(c) The following information relates to the Flyby Knight Plc for the six months ended 31 December 20X1:

(i) Use the continuous apportionment (repeated distribution) method to apportion the service departments’ overheads between each other.

(ii) Apportion the service departments’ overheads calculated in (i) to the production departments.

(iii) Show how the overheads apportioned to the production departments would have differed if the elimination method had been used for the service departments.

(iv) State how far it is true to say that the elimination method produces an inaccurate answer, and is therefore not to be recommended.

Transcribed Image Text:

Overheads (£) Overheads to be apportioned: Dept X (%) Dept Y (%) Production Departments A B 14,000 12,000 35 30 30 40 с 8,000 20 25 Service Departments X 4,000 140 5 Y 3,000 15 T