REQUIRED

Use the information provided below to answer the following questions:

1.1

Prepare a overhead allocation statement using traditional costing.

(12 marks)

1.2

Calculate the allocation rate for each of the production centres, based on machine hours for Machine centres X and Y and direct labour hours for Assembly.

(3 marks)

1.3

Calculate the overheads applied to each batch of Product A.

(5 marks)

INFORMATION

Pomsun Limited has 3 production centres (Machine centre X, Machine centre Y and an Assembly centre) and 2 service centres (Materials procurement and General manufacturing support). The annual overhead costs are as follows:

R

Indirect materials:

Machine centre X

300 000

Machine centre Y

483 000

Assembly

63 000

Materials procurement

0

General manufacturing support

6 000

Indirect labour:

Machine centre X

600 000

Machine centre Y

600 000

Assembly

900 000

Materials procurement

660 000

General manufacturing support

888 000

Heating and lighting

300 000

Property tax

600 000

Insurance of machinery

90 000

Depreciation of machinery

900 000

Insurance of buildings

150 000

Salaries of works management

480 000

2

SA1

The following information is also provided:

Carrying value of machinery

Area occupied

(m2)

Number

of

employees

Direct labour hours

Machine hours

Machine centre X

R4 800 000

6 000

180

600 000

1 200 000

Machine centre Y

3 000 000

3 000

120

600 000

600 000

Assembly

600 000

9 000

180

1 200 000

Stores

300 000

9 000

60

Maintenance

300 000

3 000

60

R9 000 000

30 000

600

Total materials issues (both direct and indirect) to the production centres are as follows:

Machine centre X

R2 400 000

Machine centre Y

1 800 000

Assembly

600 000

R4 800 000

Secondary allocation: The value of materials issued is used as a basis for the materials procurement cost centre and direct labour hours as the basis for the general manufacturing support cost centre.

Product A is produced in batches of 100. Each unit spends 6 hours in the Machine centre X, 12 hours in Machine centre Y and 12 hours in the Assembly centre.