The Production Manager of ACE Productions provided the following budgeted information for

each department. Additionally, there are two service departments: Stores and Maintenance. The

following data below are the budgeted data for the same period:

A B C Maintenance Stores

Indirect Labour $5,062,500 $2,531,250 $4,218,750 $1,350,000 $1,687,500

Indirect Materials $1,012,500 $843,750 $2,531,250 $2,025,000 $2,362,500

Other Expenses $2,700,000 $3,375,000 $1,687,500 $675,000 $2,700,000

Labour hours 525,000 270,000 675,000

Machine hours 337,500 506,250 843,750

Below are the actual overhead and actual activities for the three (3) production departments at

General's Ltd for the year ended August 2018.

A B C

Indirect Labour $5,062,500 $675,000 $1,012,500

Indirect Materials $1,687,500 $1,012,500 $2,362,500

Other Expenses $3,375,000 $5,062,500 $4,218,750

Labour hours 687,500 337,500 843,750

Machine hours 337,500 675,000 1,012,500

Overhead is absorbed based on how intensive the individual departments are considered. It

has been estimated that service department usage is as follows:

A B C Maintenance Stores

Maintenance 30% 45% 15% - 10%

Stores 60% 15% 20% 5% -

Required:

a. how do 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. [16 marks]

b. Calculate the overhead absorbed in each department. [3 marks]

c. Calculate the under/over absorbed overheads for each department. [3 marks]

Answer rating: 100% (QA)

Answer a Apportionment of Service Costs using Simultaneous Equations Heres how to schedule the apportionment of service costs to production departments using simultaneous equations Step 1 Define Varia... View the full answer