The indirect costs incurred by the business on behalf of all departments taken together are given...

 

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The indirect costs incurred by the business on behalf of all departments taken together are given below: Cost item Indirect materials Indirect labour Rent Insurance. Depreciation Direct materials used for production Number of employees Floor area Total cost this month, Value of machinery Total 80,600 The costs must be apportioned (shared) over the departments because there is insufficient information to permit allocation of costs as a whole. The following table sets out relevant information about each department which will be used in the process of determining an overhead cost rate: 36,000 10 40,000 1,000 1,600 2,000 Number of direct labour hours worked on 55,000 production Assembly 400,000 100 sq m 30,000 Finishing 500,000 25 200 sq m 50,000 64,000 Maintenance not applicable 5 100 sq m 20,000 not applicable. Required: Calculate the overhead cost allocated to the product. Suppose to produce the product you need to spend 2 hours in assembly department and 3 hours in finishing department. The indirect costs incurred by the business on behalf of all departments taken together are given below: Cost item Indirect materials Indirect labour Rent Insurance. Depreciation Direct materials used for production Number of employees Floor area Total cost this month, Value of machinery Total 80,600 The costs must be apportioned (shared) over the departments because there is insufficient information to permit allocation of costs as a whole. The following table sets out relevant information about each department which will be used in the process of determining an overhead cost rate: 36,000 10 40,000 1,000 1,600 2,000 Number of direct labour hours worked on 55,000 production Assembly 400,000 100 sq m 30,000 Finishing 500,000 25 200 sq m 50,000 64,000 Maintenance not applicable 5 100 sq m 20,000 not applicable. Required: Calculate the overhead cost allocated to the product. Suppose to produce the product you need to spend 2 hours in assembly department and 3 hours in finishing department.

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To allocate the indirect costs to each department we need to use an appropriate basis for allocation Here are the basis for allocation for each cost i... View the full answer