ABMC2054 Cost & Management Accounting I TUTORIAL 4: OVERHEADS Section A Question 1 A factory comprises three production cost centres and two service cost centres. The factory overhead budget for the year commencing 1 January 2019 is detailed below: Indirect Materials Indirect Wages (RM'000) (RM'000) Allocated overhead (P1) Machine shop No.1 274 750 (P2) Machine shop No.2 326 900 (P3) Assembly shop 170 380 (S1) Material services 38 230 (S2) Personnel services 22 130 830 2,390 RM'000 Other overheads: Insurance (building) 60 Insurance (plant) 180 Depreciation (plant) 900 Rent and rates 300 Power 120 Light and heat 120 1,680To facilitate apportionment, the cost accountant has converted appropriate quantitative figures into percentage as follows: Cost centres P1 P2 P3 S1 $2 Book value of machines 35 45 15 5 - Floor area 25 30 20 15 10 Values of stores issues 40 50 10 - Power usage 40 45 10 5 Number of employees 35 45 20 I Planned production capacities are: Machine hours (000) 600 800 1 Personnel hours (000) 450 The overheads of service cost centre S1 are apportioned on the basis of the value of stores issues in the period. The overheads of service cost centre S2 are apportioned on the basis of the number of employees in the other cost centres. Required: (a) Draw up a suitable columnar form and, using appropriate bases, distribute the budgeted overhead costs over the cost centres. (b) Apportion the accumulated costs of the two service centres over the three production centres, again using suitable bases. (c) Calculate an overhead absorption rate for each of the three production cost centres.Question 2 Seng Fatt Sdn. Bhd. has two departments A and B engaged in manufacturing operations and they are serviced by a Stores, Maintenance department and Tool room. The following has been budgeted for the next financial period. Overheads (RMOOO) Indirect labour A 620 B 846 Stores 149 Maintenance 115 Tool room 107 Supervision 140 Power 160 Rent 280 Rates 112 Plant insurance 40 Plant depreciation 20 Additional information available includes: A B Stores Maintenance Tool room Floor area (sq.metres) 1,000 2.500 1,100 600 100 Number of employees 30 50 10 20 30 Power (kilowatt hours) 60,000 30,000 3,000 15,000 12.000 No. of material requisitions 5,000 6,000 2,000 3,000 Maintenance hours 8,000 9,000 6.000 Plant value (RM) 50,000 40,000 5,000 5.000 Tool room hours estimated 7,000 10,000 Machine hours estimated 55,200 99,000Required: Calculate appropriate machine hour overhead absorption rates for both manufacturing departments in which all overheads will be recovered.Question 3 Metal Components Bhd. supplies non-standard metal machine parts to customers' drawings specifications. The factory comprises the following production departments: Heavy machine (code HM) Light machine (code LM) Finishing (code F) Direct materials and wages are charged to jobs whilst production overhead is added by applying a fixed percentage on direct wages cost (based on the annual budget), one "blanket" or "overall" rate being used for all factory production. Consideration is being given to a suggestion that the application of separate departmental rates, based on budgeted working hours, would result in more accurate job costs. The following data appear in the budget for the current year: Departmen Direct Machine Manual Production t wages hours hours overhead (RM) (RM) HM 102,000 25,000 150,000 LM 40,000 10,000 26,000 F 8,000 2,000 4,000 Actual figures for the month of May were: Department Direct Machine Manual Production wages hours hours overhead (RM) (RM) HM 8,000 2,000 12,500 LM 3,000 800 1,950 F 1,000 250 550 Job No. 782 commenced and finished during May and the following details were recorded: Departmen Direct Direct Machine Manualt materials wages hours hours (RM) (RM) HM 520 160 40 LM - 200 50 - 1: 40 10 Required: (a) Calculate the current \"blanket\" absorption rate. (b) Calculate separate departmental absorption rates per hour. (c) Compute the total production cost of I ob No. 7 82: (i) using the current blanket absolption rate (ii) using a separate hourly rate for each department. (d) Ascertain the overt(under) absolption by departments and in total for the month of May using the current blanket rate on direct wages. Question 4 High Desert Pottery Bhd. makes a variety of pottery products that it sells to retailers. The company uses a job order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Moulding Department is based on machine hours, and the rate in the Painting Department is based on direct labour cost. At the beginning of the year, the company's management made the following estimates: Moulding Painting Department Department Direct labour hours 12,000 60,000 Machine hours 70,000 8,000 Direct material cost (in RM) 510,000 650,000 Direct labour cost (in RM) 130,000 420,000 Manufacturing overhead cost (in RM) 602,000 7 35,000 Job 205 was started on August 1 and completed on August 10. The company cost records show the following information concerning the job: Department Moulding Painting Department Department Direct labour hours 30 85 Machine hours 110 20 Direct material issued (in RM) 470 332 Direct labour cost (in RM) 290 680 Required: (a) Compute the pnedetermined overhead rates used during the year in Moulding Department and Painting Department. (b) Compute the total overhead cost applied to Job 205. (c) What would be the total cost recorded for Job 205? If the job contained 50 units, what would be the unit product cost? (d) At the end of the year, the records of the company revealed the following actual cost and the operating data for all jobs worked on during the year: Department Moulding Painting Department Department Direct labour hours 10,000 62,000 Machine hours 65,000 9,000 Direct materials cost (in RM) 430,000 680,000 Direct labour cost (in RM) 108,000 436,000 Manufacturing overhead cost (in RM) 570,000 7 50,000 Required: What was the amount of over/(under) absorbed overhead in each department at the end of the year