Handy Headphones is an Irish company that is manufacturing

Handy Headphones is an Irish company that is manufacturing lightweight, flexible, Bluetooth[1] enabled, and waterproof headphones. It is proving to be very popular among people wanting to listen to music in the shower or while swimming on holiday or at community leisure centers’ lane swimming sessions (mainly because of their £159 price tag). Before the headphones can be delivered to the warehouse for distribution, they pass through a five[1]stage production process.

The headphones start in the molding department and work their way through the wiring department, IT department, polishing department, and, finally, the packaging department. As well to these five production departments, there are two other non-production departments within this factory.

These two service departments are the canteen and the maintenance department. All employees who work in this factory have the benefit of eating at the subsidized canteen. The maintenance department is responsible for the general maintenance and repairing of the machinery within the whole factory. Handy currently makes 2,500 headphones. The forecast figures for the Handy Headphones for 2020 are as follows:

Factory rent

£140,000

Re-decorating of moulding department

£20,000

Electricity cost

£30,000

Depreciation of machinery

£5,000

Direct materials

£24,000

Direct labour – skilled workers

£20,000

Direct labour – unskilled workers

£26,000

Direct expenses

£10,000

Training for IT department staff

£6,500

Packaging department floor resurfacing

£3,000

New machinery for maintenance department

£23,500

Canteen redesign

£55,000

The departmental specifications are provided below:

Molding

Wiring

IT

Polishing

Packaging

Maintenance

Canteen

Total

Area (m²)

1,000

800

550

650

700

60

70

3,830

Machine value (£)

20,000

4,000

55,000

38,000

23,000

-

20,000

160,000

Number of staff

10

40

12

6

12

20

100

Practical task Use a spreadsheet to complete the following task: 1 You are a newly appointed cost accountant for Handy Headphones and you are curious to know what the total cost per headphone is working out at. You need to analyze the overhead costs, how they are allocated, apportioned and reapportioned as there may be some changes made by the management accountant based on your findings. The management accountant would also like to know how all these costs would be shown on the standard cost card.