Scitec Sdn.Bhd. has three production departments, A, B and C and two service departments, Stores and...

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Scitec Sdn.Bhd. has three production departments, A, B and C and two service departments, Stores and Maintenance. For the forthcoming period, the total budgeted overhead costs are as follows: Allocated costs: Departments: A Indirect materials Indirect labour RM'000 RM'000 13 10 B 11 5 9 4 Stores 4 Maintenance 3 65 Apportioned costs: RM'000 Heat and light 18 Plant insurance 14 7 Canteeen costs The following information is available: 3/7 Department A B Stores Maintenance Total Machine hours 10,000 12,000 10,000 4,000 36,000 Direct labour hours 5,000 6,000 7,000 18,000 Number of employees 60 50 40 20 10 180 Floor areas (square metres) 7,500 6,000 4,500 3,000 3,000 24,000 Plant valuation (RM) 50,000 60,000 50,000 300,000 Material requisitions 1,000 800 900 20,000 300 480,000 3,000 The company currently uses a blanket absorption rate based on the percentage of direct material cost to absorb production overhead. However, the newly appointed management accountant proposed to absorb the overhead cost based on departmental rates. Required: (a) Prepare an overhead analysis sheet for the forthcoming period, showing clearly the bases of apportionment used. Reapportion the service departments costs using direct method (work to the nearest RM). (20 marks) Question 1 (Continued) (b) Calculate the departmental overhead absorption rate for each production department by using an appropriate basis (round up the answer to the nearest RM). (c) rate. (3 marks) Explain why departmental overhead absorption rate is preferable to blanket overhead absorption (2 marks) [Total: 25 marks] Scitec Sdn.Bhd. has three production departments, A, B and C and two service departments, Stores and Maintenance. For the forthcoming period, the total budgeted overhead costs are as follows: Allocated costs: Departments: A Indirect materials Indirect labour RM'000 RM'000 13 10 B 11 5 9 4 Stores 4 Maintenance 3 65 Apportioned costs: RM'000 Heat and light 18 Plant insurance 14 7 Canteeen costs The following information is available: 3/7 Department A B Stores Maintenance Total Machine hours 10,000 12,000 10,000 4,000 36,000 Direct labour hours 5,000 6,000 7,000 18,000 Number of employees 60 50 40 20 10 180 Floor areas (square metres) 7,500 6,000 4,500 3,000 3,000 24,000 Plant valuation (RM) 50,000 60,000 50,000 300,000 Material requisitions 1,000 800 900 20,000 300 480,000 3,000 The company currently uses a blanket absorption rate based on the percentage of direct material cost to absorb production overhead. However, the newly appointed management accountant proposed to absorb the overhead cost based on departmental rates. Required: (a) Prepare an overhead analysis sheet for the forthcoming period, showing clearly the bases of apportionment used. Reapportion the service departments costs using direct method (work to the nearest RM). (20 marks) Question 1 (Continued) (b) Calculate the departmental overhead absorption rate for each production department by using an appropriate basis (round up the answer to the nearest RM). (c) rate. (3 marks) Explain why departmental overhead absorption rate is preferable to blanket overhead absorption (2 marks) [Total: 25 marks]

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Overhead Analysis Sheet For the Forthcoming Period Department A B C Stores Maintenance Total D... View the full answer