Question 5 (31 marks) Below are the actual overhead and actual activities for the three (3)...

 

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Question 5 (31 marks) Below are the actual overhead and actual activities for the three (3) production departments at General's Ltd for the year ended August 2018. Indirect Labour Indirect Materials Other Expenses Machine hours Labour hours Indirect Labour Indirect Materials Other Expenses Labour hours Machine hours A B $3,375,000 $ 450,000 $1,125,000 $ 675,000 $2,250,000 $3,375,000 225,000 450,000 1,125,000 225,000 Prior to the end of the period, the production manager provided the following budgeted information for each of the departments. The entity also has two service departments: Stores and Maintenance. The following immediately below are the budgeted data for the same period: Maintenance Stores B A $2,250,000 $1,687,500 $ 675,000 $ 562,500 $2,700,000 $2,250,000 1,350,000 225,000 180,000 337,500 A 20% 50% $ 675,000 $1,575,000 $2,812,500 675,000 562,500 B 40% 20% Overhead is absorbed based on how intensive the individual departments are considered. It has been estimated that service department usage is as follows: C $2,812,500 $1,687,500 $1,125,000 450,000 562,500 с 20% 20% Maintenance Stores $ 1,125,000 $ 900,000 $ 1,350,000 $ 1,575,000 $ 450,000 $ 1,800,000 (b) Calculate the overhead absorbed in each department. 1 Maintenance 10% Stores 20% Required: (a) Prepare a schedule to apportion the notional service cost to production and the total overheads for the production departments after apportionment. Hint: use simultaneous equations to derive the notional values. (13 marks) (12 marks) (c) Calculate the under/over absorbed overheads for each department and the entity in total. (6 marks) (d) What are the two main factors that give rise to over/under absorption of overheads? (2 marks) Question 5 (31 marks) Below are the actual overhead and actual activities for the three (3) production departments at General's Ltd for the year ended August 2018. Indirect Labour Indirect Materials Other Expenses Machine hours Labour hours Indirect Labour Indirect Materials Other Expenses Labour hours Machine hours A B $3,375,000 $ 450,000 $1,125,000 $ 675,000 $2,250,000 $3,375,000 225,000 450,000 1,125,000 225,000 Prior to the end of the period, the production manager provided the following budgeted information for each of the departments. The entity also has two service departments: Stores and Maintenance. The following immediately below are the budgeted data for the same period: Maintenance Stores B A $2,250,000 $1,687,500 $ 675,000 $ 562,500 $2,700,000 $2,250,000 1,350,000 225,000 180,000 337,500 A 20% 50% $ 675,000 $1,575,000 $2,812,500 675,000 562,500 B 40% 20% Overhead is absorbed based on how intensive the individual departments are considered. It has been estimated that service department usage is as follows: C $2,812,500 $1,687,500 $1,125,000 450,000 562,500 с 20% 20% Maintenance Stores $ 1,125,000 $ 900,000 $ 1,350,000 $ 1,575,000 $ 450,000 $ 1,800,000 (b) Calculate the overhead absorbed in each department. 1 Maintenance 10% Stores 20% Required: (a) Prepare a schedule to apportion the notional service cost to production and the total overheads for the production departments after apportionment. Hint: use simultaneous equations to derive the notional values. (13 marks) (12 marks) (c) Calculate the under/over absorbed overheads for each department and the entity in total. (6 marks) (d) What are the two main factors that give rise to over/under absorption of overheads? (2 marks)

Answer rating: 100% (QA)

a Schedule to apportion service department costs to production departments Service department Cost to be apportioned of apportioning A B C Total Maintenance 3214286 20 4020 642857 1285714 642857 Store... View the full answer