2.2. Traditional costing methods
A subsection of Accounting, 9706, through 2. Cost and management accounting (AS Level)
Listing 10 of 533 questions
A company has two production departments, manufacturing and assembly, and a stores service department. The overheads are apportioned to each department using the appropriate costing information supplied. manufacturing assembly stores direct labour hours 8 400 33 600 machine hours 20 160 6 720 total cost of the stores department $32 800 number of store requisitions 3 000 2 000 What are the overhead absorption rates for the two production departments in respect of the stores?
9706_m23_qp_12
MCQ
2023
Paper 1, Variant 2
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Winston Ltd had estimated the following factory indirect costs for its financial year ended 30 April 2012. $ Indirect wages 2 120 000 Repairs and maintenance of machinery 410 000 Rent and rates 53 000 Machinery insurance 24 000 Premises insurance 28 000 Electricity – power 48 000 Depreciation of machinery 14 000 Consumables 21 150 The company calculated a suitable overhead absorption rate for each of its two production departments using the following information. Production departments Service departments Machining Assembly Maintenance Canteen Machine cost ($) 617 500 332 500 – – Direct machine hours 202 500 22 500 – – Direct labour hours 55 500 314 500 – – Floor area (square metres) 9 000 8 000 2 000 1 000 Power usage (%) Number of employees Consumables ($) 9 550 9 800 1 250 The proportion of work done by each service department was: Machining Assembly Maintenance Canteen (%) Maintenance (%) – For Examiner's Use REQUIRED Complete the following table to calculate the total overheads for each production cost centre. Cost Basis Machining Assembly Maintenance Canteen Calculate the appropriate overhead absorption rate for each production department. Machining Assembly For Examiner's Use The actual results for the year ended 30 April 2012 were as follows: Machining Assembly Factory indirect costs ($) 1 410 000 1 312 000 Direct machine hours 195 000 21 000 Direct labour hours 57 000 318 000 REQUIRED Calculate the amount of overhead which would be over or under-absorbed by each production department. Explain how the results in could have occurred. For Examiner's Use Explain the problems associated with using predetermined overhead absorption rates in calculating the price of a product.
9706_s12_qp_22
THEORY
2012
Paper 2, Variant 2
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Chester Limited manufactures clothing. The work takes place in three production departments – cutting, sewing and finishing. In addition, the business has two service departments – stores and maintenance. The budgeted overheads for the year ending 31 March 2014 were as follows: $ Indirect wages 185 400 Rent and rates 38 500 Power 32 600 Light and heat 18 800 Machine depreciation 73 700 Buildings insurance 18 200 The following information is available. Cutting Sewing Finishing Stores Maintenance Number of indirect employees Floor space (square metres) 5 000 6 000 3 000 3 000 4 000 Net book value of machinery ($) 86 000 64 000 12 000 - 5 000 Machine hours 40 000 50 000 4 000 - - Direct labour hours 84 000 22 000 56 000 - - Raw material issues 75% 17.5% 2.5% - 5% Chester Limited uses a single overhead rate to absorb all overheads on a direct labour hour basis. REQUIRED State one advantage and one disadvantage to Chester Limited of using a single overhead absorption rate. Advantage Disadvantage Calculate, correct to two decimal places, the overhead absorption rate for the year ending 31 March 2014. Additional information The directors of Chester Limited are considering changing the basis for recovering overheads to calculate a separate overhead absorption rate for each production department. REQUIRED Apportion the costs to the five departments and re-apportion the service departments’ costs to production departments using a suitable basis. Total $ Cutting $ Sewing $ Finishing $ Stores $ Maintenance $ Indirect wages Rent and rates Power Light and heat Machine depreciation Buildings insurance Reapportion stores Reapportion maintenance Calculate, correct to two decimal places, appropriate overhead absorption rates for each production department. Additional information The actual results for the year were as follows: Cutting Sewing Finishing Factory overheads $168 180 $146 320 $51 870 Direct labour hours 85 200 20 950 58 140 Direct machine hours 42 330 52 450 4 280 REQUIRED Calculate the under- or over-absorption of overheads for each production department. Cutting $ Sewing $ Finishing $ Manufacturing businesses classify costs by function. State three functional groups of costs.
9706_s14_qp_23
THEORY
2014
Paper 2, Variant 3
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Questions Discovered
533