Good Line Enterprise has Maintenance and Canteen Departments that support the four production departments. Details of...

 

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Good Line Enterprise has Maintenance and Canteen Departments that support the four production departments. Details of total overheads for the first quarter of 2021 are provided below: Maintenance Canteen GH¢ Department A B C D GH¢ GH¢ GH¢ GH¢ GH¢ Overheads 6,200 5,000 4,800 6,500 4,200 3,600 The service departments costs are shared as follows based on the benefits derived. Department A B C D Maintenance Canteen Maintenance 15% 25% 20% 30% 10% Canteen 20% 20% 35% 10% 15% Required: (a) Compute the total overheads for each of the production departments after the apportionment of the service department costs. (b) Explain over and under absorbed overheads indicating the effect of each on gross profit. (c) Mention and explain two (2) merits and two (2) demerits of using pre-determined overheads absorption rate to determine the cost of a product. Good Line Enterprise has Maintenance and Canteen Departments that support the four production departments. Details of total overheads for the first quarter of 2021 are provided below: Maintenance Canteen GH¢ Department A B C D GH¢ GH¢ GH¢ GH¢ GH¢ Overheads 6,200 5,000 4,800 6,500 4,200 3,600 The service departments costs are shared as follows based on the benefits derived. Department A B C D Maintenance Canteen Maintenance 15% 25% 20% 30% 10% Canteen 20% 20% 35% 10% 15% Required: (a) Compute the total overheads for each of the production departments after the apportionment of the service department costs. (b) Explain over and under absorbed overheads indicating the effect of each on gross profit. (c) Mention and explain two (2) merits and two (2) demerits of using pre-determined overheads absorption rate to determine the cost of a product.

Answer rating: 100% (QA)

Answer Step by Step Explanation a The total overheads of two service departments will be determined as follows Let M stand for maintenance overheads a... View the full answer