Finnegan and Wakely Limited produces solar panels for domestic installation. The panels go through three departments...

 

  

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Finnegan and Wakely Limited produces solar panels for domestic installation. The panels go through three departments (cost centres) in the production process: cutting, fixing and finishing. In August 20X4 the company incurs the following factory production overheads which it plans to allocate and apportion between its three departments: Supervisory salaries Factory rent and rates 9,955 14,220 594 6,866 864 Canteen costs Electricity Building maintenance Machinery depreciation Machinery maintenance Factory insurance 1,430 1,764 820 Total 36,513 The following information is relevant for the apportionment of overheads: Cutting 4,000 sq. Fixing 4,000 sq. m. Finishing 1,000 sq. Total Floor area 9,000 sq. m. m. m. Employees Machinery Book Value) Electricity Maintenance outs Insurance claims in last five years 11 7 (Net £171,600 £76,800 £67,200 £27,600 £6,866 18 £2,950 £2,882 £1,034 1 call 11 4 1 1 Required: Produce a schedule apportioning the overheads between the three departments on the most appropriate bases. (18 marks) PART II Grex Products Limited organizes its production into three cost centres: processing, assembly and packaging. The company plans to produce 76,000 units of product in the forthcoming year, 20X8. Further details of its production plans for 20X8 are as follows: wwwwm Cost centre Production Machine hours Direct labour overhead £ hours Processing Assembly Packaging 8,000 18,000 6,000 993,500 442,000 196,600 60,000 25,000 10,000 Required: a) Calculate the overhead absorption rates for each department on the most appropriate bases: i) Processing ii) Assembly i) Packaging (6 marks) b) Suggest reasons why the company has selected these bases for calculation of overhead absorption rates in each department. (3 marks) Approximately 100 words c) Explain reasons for the calculation of overhead absorption rates. (3 marks) Finnegan and Wakely Limited produces solar panels for domestic installation. The panels go through three departments (cost centres) in the production process: cutting, fixing and finishing. In August 20X4 the company incurs the following factory production overheads which it plans to allocate and apportion between its three departments: Supervisory salaries Factory rent and rates 9,955 14,220 594 6,866 864 Canteen costs Electricity Building maintenance Machinery depreciation Machinery maintenance Factory insurance 1,430 1,764 820 Total 36,513 The following information is relevant for the apportionment of overheads: Cutting 4,000 sq. Fixing 4,000 sq. m. Finishing 1,000 sq. Total Floor area 9,000 sq. m. m. m. Employees Machinery Book Value) Electricity Maintenance outs Insurance claims in last five years 11 7 (Net £171,600 £76,800 £67,200 £27,600 £6,866 18 £2,950 £2,882 £1,034 1 call 11 4 1 1 Required: Produce a schedule apportioning the overheads between the three departments on the most appropriate bases. (18 marks) PART II Grex Products Limited organizes its production into three cost centres: processing, assembly and packaging. The company plans to produce 76,000 units of product in the forthcoming year, 20X8. Further details of its production plans for 20X8 are as follows: wwwwm Cost centre Production Machine hours Direct labour overhead £ hours Processing Assembly Packaging 8,000 18,000 6,000 993,500 442,000 196,600 60,000 25,000 10,000 Required: a) Calculate the overhead absorption rates for each department on the most appropriate bases: i) Processing ii) Assembly i) Packaging (6 marks) b) Suggest reasons why the company has selected these bases for calculation of overhead absorption rates in each department. (3 marks) Approximately 100 words c) Explain reasons for the calculation of overhead absorption rates. (3 marks)