A factory manufactures garden huts. The production process is classified into two production departments, assembly, and joinery. There is one service department, the canteen. The relevant forecast information for the year ahead is as follows.
Indirect costs for all three departments in total:
Total
Indirect labor 68,000
Indirect material 65,000
Heating and lighting 36,000
Rent and rates 40,000
Depreciation of machinery 54,000
Supervision 46,000
Power 38,000
Grand total 347,000
The following information is available for each department:
Total Assembly Joinery Canteen
Floor space (sq metres) 50,000 20,000 24,000 6,000
Book value of machinery (RM) 560,000 300,000 240,000 20,000
Number of employees 150 80 60 10
Kilowatt hours of power 18,000 9,000 8,000 1 ,ooo
Direct materials (RM) 100,000 50,000
Direct labour (RM) 50,000 42,000
Maintenance hours 8,000 6,000
Labour hours 12,640 8,400
The service department overhead costs are re-apportioned by a number of employees.
Required:
a) Apportion production overhead costs over the Assembly, Joinery, and Canteen departments using a suitable basis for each department.
b) Apportion service department costs over production departments.

c) For each production department, calculate an overhead rate, based on labor hours, which may be used to absorb production overhead costs into jobs.

d) Find the overhead cost of a job that spends 4 labor hours in the Assembly Department and 5 labor hours in the Joinery Department.

Answer rating: 100% (QA)

Answer Part a Allocation of production overhead cost Part b Apportionment of canteen department over... View the full answer