In Bennetts Ltd three types of jobs are performed in separate production departments E, F, and G.
Question:
In Bennett’s Ltd three types of jobs are performed in separate production departments E, F, and G. In addition, there are two service departments A and B. indirect labour costs and other indirect expenses for Bennett’s Ltd, have been allocated to departments as follows:
Production departments | Service departments |
E F G Indirect labour 5000 7000 9000 Other indirect exp. 2000 4000 6000 7000 11000 15000 | A B Indirect labour 2000 3000 Other indirect exp. 3000 4000 5000 7000 |
The expenses of the service departments are to be allocated between other departments as follows:
Dept. A to Depts. E 30%; F 25%; G 35%; B 10%
Dept. B to Depts. E 35%; F 29%; G 36%
In departments E and F the job costing is to use an overhead rate per direct labour, while in G an overhead rate per machine hour rate is used. The number of direct hours and machine hours per department is expected to be:
E F G
Machine hours 9,000 7000 5600
Direct labour hours 7500 5300 12,000
You are required to:
A. Apportion the costs from the service departments to the production departments.
B. Calculate the overhead rates for departments E, F and G.
C. What would be the cost of the following jobs given that the direct labour costs per hour are: Dept. E $4, F $5 and G $5
Expert Answer:
