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OVERHEAD – DISTRIBUTION SUMMARY

1. Following are the particulars relating to 3 machines for a particulars period of 320 hours:
Machine A Machine B Machine C
Cost of Machine (Rs.) 20,000 30,000 40,000
Power (Rs.) 90 160 300
Direct Wages (Rs.) 600 1,600 2,400
Area occupied (Sq. mt.) 200 500 800
No. of workers 4 10 20
Light points 4 8 12
During the period following expenses were incurred:
Rs. Rs.
Rent & Rates 900 Lighting Expenses 96
Depreciation 2,700 Indirect Wages 920
Power 550 Repairs 3,600
Canteen Expenses 102 Sundries 621
Compute comprehensive machine hour rate for each of the above machine.
[Ans. A: Rs. 7.62; B: Rs. 14.87; C: Rs. 21.54. Sundries: Direct Wages]

2. The machine shop of an auto-engineering factory has five distinct groups of machines for which the
recovery of expenses is at a rate per machine hour.
A budget for the machine shop for the year ended 31.12.10 is framed as under:
Groups: 1 2 3 4 5
Consumable stores (Rs.) 210 420 700 850 1,260
Maintenance (Rs.) 630 840 1,500 2,000 1,800
Horse power hours ratio 5 15 20 25 35
Space occupied (sq. metres) 200 400 600 300 500
Book value of machinery (Rs.) 30,000 90,000 25,000 60,000 45,000
Estimated utilisation hours 5,000 10,000 3,000 7,500 12,500
Common expenses are:
Rs. Rs.
Power 9,000 Insurance on machinery 7,500
Rent, rates and taxes 25,000 Depreciation 37,500
Heat and light 5,500 Shop supervision 30,400
Insurance on building 2,400 Other general expenses 60,800
Calculate a Machine Hour Rate for each group indicating the basis of apportionment of expenses.
[Ans. 1: Rs. 4.40; 2: Rs. 4.94; 3: Rs. 8.52; 4: Rs. 5.18; 5: Rs. 4.20. Hints. Shop Supervision and Other
General Expenses in Utilisation Hours]

3. Alpha Engineering Company has three production Departments A, B and C. From the following
particulars calculate labour hour rate of A, B and C Departments.
Expenses relating to a month: Rs. Rs.
Power 3,600 Depreciation on machinery 6,400
Rent 7,000 Electricity 2,500
Indirect wages 3,800
Further information:
Dept. A Dept. B Dept. C
Floor space (sq. m.) 1,000 2,000 500
Cost of machine (Rs.) 40,000 30,000 10,000
Light points (Nos.) 12 12 6
No. of workers 10 8 4
Direct wages (Rs.) 10,000 6,000 3,000
Horse power hour 3 2 1
ratio
There were 25 working days of 8 hours each in the month.
[Ans. A Rs. 5.00; B Rs. 6.125; C Rs. 4.375]
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4. The following data pertain to the machine shop of an engineering company, relating to the year 2010.
The machine shop has three cost centres A, B and C, each having three distinct set of machines.
A B C Total
No. of workers 400 400 800 1,600
No. of machine-hours 50,000 50,000 60,000 1,60,000
Percentage of HP-hours 40 25 35 100
Value of assets (Rs. in lakhs) 20 35 30 85.00
Direct wages (Rs. in lakhs) 16 20 24 60.00
Indirect wages (Rs. in lakhs) 18.00
Supervisory salaries (Rs. in lakhs) 7.00
Depreciation (Rs. in lakhs) 8.50
Insurance (Rs. in lakhs) 4.25
Electricity charges (Rs. in lakhs) 12.00
Welfare expenses (Rs. in lakhs) 9.00
Office and other expenses (Rs. in lakhs) 16.00
Work out a composite machine hour rate for each of the cost centres, showing the basis of
apportionment of expenses amongst the cost centres.
[Ans. A Rs. 75.20; B Rs. 86.50; C Rs. 89.83. Hint. Office & other Exp. in Machine Hours]

5. Particulars of 3 machines used in a factory are as under (six-week period: 160 working hours):
Machine No. 1 Machine No. 2 Machine No. 3
Cost of machine (Rs.) 10,000 15,000 20,000
Number of workers 2 5 10
Direct wages (Rs.) 300 800 1,200
Power (Rs.) 45 80 150
Light points 2 4 6
Area occupied (sq. metres) 100 250 400
The expenses incurred during the period were as follows:
Rs. Rs.
Power 275 Repairs 1,800
Lighting 48 Indirect Wages 460
Rent and Rates 450 Canteen Expenses 51
Depreciation 1,350 Sundries 300
Compute the machine hour rate for each machine.
[Ans. No. 1 Rs. 6.12; No. 2 Rs. 9.82; No. 3 Rs. 13.65. Sundries on hours worked basis]

6. A department is having three machines. The figures indicate the departmental expenses. Calculate
the machine hour rate in respect of these machines from the information given below:
Rs. Rs.
Depreciation of machinery 12,000 Indirect wages 6,000
Depreciation of building 2,880 Power 6,000
Repairs to machinery 4,000 Lighting 800
Insurance of machinery 800 Miscellaneous expenditure 4,200
Other information:
Machine I Machine II Machine III
Direct wages Rs.1,200 Rs. 2,400 Rs. 2,400
Power units 30,000 10,000 20,000
Number of workers 4 8 8
Light points 8 24 48
Space (sq. ft.) 400 800 800
Cost of machines Rs. 3,00,000 Rs. 1,20,000 Rs. 1,80,000
Hours worked 200 300 300
[Ans. I: Rs. 70.48; II: Rs. 32.77; III: Rs. 42.51. Hint. Misc. Exp. in Direct Wages]
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7. The particulars relating to four machines are as follows:
Machine Number I II III IV
Cost (Rs.) 50,000 40,000 30,000 20,000
Area occupied (Sq. ft.) 500 450 300 250
Light points 10 8 6 4
No. of workers 20 15 8 7
Direct Wages (Rs.) 1,500 1,200 1,000 500
H. P. of machines 25 20 16 14
Consumable stores (Rs.) 100 80 75 50
The expenses incurred were as follows:
Rs. Rs. Rs.
Rent and Taxes 600 Repairs and maintenance 700 Consumable Stores 305
Lighting 140 Power 375 Canteen Expenses 100
Depreciation 2,800 Indirect Wages 840 General expenses 420
(a) Compute the comprehensive machine hour rate for a month of 25 working days with 8 working
hours on an average.
(b) Calculate the cost of production of one unit of product A, if the material cost is Rs. 10, Labour
cost Rs. 20 and if processed for one hour in machine I, two hours in machine II, three hours in
machine III and four hours in machine IV.
[Ans. (a) I – Rs. 18.575; II – Rs. 14.955; III – Rs. 11.855; IV – Rs. 7.02. (b) Rs. 122.12]

8. A machine shop of a factory has 3 cost centre having distinct sets of machines.
The Following estimates are available for the year 2014:
Total Centre I Centre II Centre III
Rs. Rs. Rs. Rs.
Direct Wages 1,60,000 50,000 50,000 60,000
Share of Service Expenses 5,000 1,000 1,500 2,500
Power 10,013
Repair & Maintenance 13,000
Insurance 3,900
Rent 3,000
Lighting 1,800
Indirect wages 14,400
Labour welfare expenses 20,000
Value of Machines 3,25,000 1,00,000 75,000 1,50,000
Floor area (sq. ft.) 120 240 360
Power of Motor (H.P.) 10 10 20
Machine Hours 5,000 6,000 10,000
No. of workers 12 10 18
Machines are depreciated at 10% p.a.
(a) Compute a suitable machine hour rate of overhead absorption for each of the machine centre.
(b) Job No. 201 passes through all the above three cost centres and the time required in each centre
is: Centre I – 4 hours, Centre II – 3 hours, Centre III – 8 hours.
What price should the company quote for Job No. 201 to yield a profit of 20% on cost if its direct
materials and direct labour cost are estimated at Rs. 500 and Rs. 300 respectively and other expenses
are 20% on works cost. [Ans. I: 5.823; II: 4.323; III: 4.856. Selling Price Rs. 1,260.16]

9. In Moon light manufacturing company, the output is produced through three machine departments
A, B and C. The company follows pre-determined overhead absorption rates for the machine
departments. Hourly rates fixed-up for the year 2001 are Rs. 16·00 per hour for Dept. A, Rs. 18·80
per hour for Dept. B and Rs. 17·50 per hour for Dept. C.
The actual expenses of these machine departments for the year 2001 are as follows:
Rs. Rs.
Depreciation on Machinery 20,000 Repairs to Machinery 12,000
Rent of Factory Shed 18,000 Lighting 4,000
Indirect Materials 10,000 Canteen Expenses 15,000
Indirect Wages 12,000 Insurance of Machines 8,000
Power 16,000 Sundry Expenses 18,000
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The particulars relating to the machine departments are given below:
Machine A Machine B Machine C
Area occupied (Sq. ft.) 800 600 400
Value of Machinery (Rs.) 80,000 60,000 60,000
Direct Wages (Rs.) 50,000 40,000 30,000
Direct Material (Rs.) 60,000 80,000 60,000
No. of Light Points 9 5 6
Power of Machines (H. P.) 20 40 20
No. of Workers 12 8 10
Actual working hours 3,000 2,500 2,000
You are required to:
(a) Calculate overhead absorption rate per working hour for the departments
(b) Compute the price to be charged for a job which required Materials of Rs 1,500 and Wages of
Rs. 1,000 assuming the office & administration over head is charged @ 20% on works cost,
selling & distribution overhead @ 20% on cost of production and profits @ 25% on sale (The
job requires 15, 12, and 10 hours of time in machines A, B and C respectively) and
(c) determine over or under absorption of factory overhead.
[Ans. (a) A - Rs. 17.27; B - Rs. 18·00; C - Rs 18·10. (b) Prime cost Rs. 2,500; Works cost Rs.
3,156·05, Cost of Production Rs. 3,787·26. Total cost Rs. 4,544·71. Profit Rs. 1,514.90; Price to be
charged Rs. 6,059·61. (c) Over-absorption: Machine B Rs. 2,000, Under absorption: A Rs. 3,810, C
Rs. 1,200]

10. T Ltd. has three machine cost-centres - Machine A, Machine B and Machine C. The company has
pre-determined factory overhead absorption rates for its machine cost centres on the basis of past
'results and present capacity-utilisation.
Such rates applicable for the year 2010 are Rs. 8.30 per hour in Machine A, Rs. 9·50 per hour in
Machine B and Rs. 9·00 per hour in Machine C.
The actual expenses incurred for the year 2010 are given below:
Rs. Rs.
Repairs to machinery 12,000 Power 16,000
Lighting 4,000 Depreciation of factory shed 18,000
Indirect materials 10,000 Indirect wages 30,000
Depreciation on machinery 28,000 Canteen expenses 15,000
Other information:
Machine A Machine B Machine C
Area occupied (sq. ft.) 800 600 400
Direct wages (Rs.) 50,000 40,000 30,000
Direct material (Rs.) 30,000 40,000 30,000
Value of machinery (Rs.) 40,000 30,000 30,000
Light points (Nos.) 18 10 12
Power of machines (kwh) 200 400 200
No. of workers 12 8 10
Actual working hours 6,000 5,000 4,000
You are required:
(a) to compute the actual machine hour rate for three machine cost centres.
(b) to determine the over-or under-absorption of factory overhead of the machine cost centres.
(c) to ascertain the price to be charged for a job which requires:
Direct material Rs. 900; Direct Wages Rs. 600; Profit @ 20% on selling price. The job requires
2 hours, 4 hours, and 4 hours of time in three machines respectively.
[Ans. (a) A Rs. 8.683; B Rs. 9.00; C Rs. 8.975. (b) A Rs. 2,300 under-absorption; B Rs. 2,500 over-
absorption; C Rs. 100 over-absorption. (c) Rs. 1988.25]

11. A production department of a manufacturing concern has three distinct machines – A, B and C. It is
estimated that each machine will normally work for 50 weeks a year. 45 hours per week, and it is
anticipated that the machines will remain idle 20% of this time due to normal repairs and
maintenance.
The budgeted figures of the production department for the year ended 31.3.06 are as follows :
Rs. Rs.
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Rent & Rates 4,800 Canteen Expenses 2,500
Lighting 900 Repairs and maintenance 6,300
Depreciation 10,500 Sundries 3,000
Indirect Wages 4,500 Power 12,000
Other information:
Machine A Machine B Machine C
Space occupied (sq. ft.) 100 150 150
Light points 5 5 8
Cost of machines (Rs) 25,000 30,000 50,000
H. P. of machines 2 2.5 3
No of workers 3 3 4
Direct Wages (Rs.) 6,000 4,000 5,000
During the 4 weeks of February, 2006 at 80% capacity utilization actual overhead incurred were:
For Machine A – Rs. 1,200; for Machine B – Rs. 900; and for Machine C – Rs. 2,000.
You are required to calculate for each machine:
(a) Pre-determined overhead rate based on effective working hours;
(b) The amount of under/over absorption of overhead; and
(c) The revised overhead application rate.
Ans. A (Rs.) B (Rs.) C (Rs.)
Overhead Rate 6.89 7.56 10.28
Under-absorption 208 ––– 520
Over-absorption ––– 189 –––
Revised Rate 8.33 6.25 13.89

OVERHEAD – SECONDARY DISTRIBUTION SUMMARY

12. A company has three production departments, A, B and C and a service department S. The overhead
cost incurred during a particular four-week period were:
Indirect Wages and Salaries: Rs. Rs. Rs.
Department A 40,000 Repairs to Machinery 6,000
Department B 30,000 Depreciation on Machinery 4,500
Department C 35,000 Electricity 3,000
Department S 25,000 1,30,000 Power 5,600
Workmen’s compensation 7,800 Insurance 3,500
insurance 6,000 Medical cost 240
Rent and rates
The following information is also available:
Dept. A Dept. B Dept. C Dept. S
Area in square metre 10,000 8,000 7,000 5,000
Number of employees 20 12 15 13
Book value of Machinery Rs. 1,00,000 Rs. 1,20,000 Rs. 60,000 Rs. 20,000
Average stock value Rs. 20,000 Rs. 15,000 Rs. 15,000 –––
Horse power of machines 120 95 55 10
Carry out the allocation and apportionment of overhead to the production departments assuming that,
service department S is a canteen.
[Ans. A Rs. 64,985; B Rs. 49,141; C Rs. 52,514. Workmen’s compensation insurance on the basis of
indirect wages and salaries]

13. A company, having two production departments and one service department, furnishes the following
particulars:
Rs. Rs.
Power 1,000 Indirect wages 2,000
Lighting 800 Sundries 5,000
Rent and rates 4,000 Depreciation of machinery 6,000
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The other particulars are:
Production Department Service Department
I II
Working hours 4,000 3,500 3,600
Direct wages (Rs.) 3,000 2,600 3,000
Cost of machinery (Rs.) 25,000 20,000 15,000
Horse power of machinery 50 30 10
Light point (Nos.) 18 12 10
Floor space (sq. metre) 1,000 1,200 800
The expenses of the service department are to be allocated between production departments I and II
in the ratio of 60 : 40.
Apportion the cost to the various departments on the most equitable basis.
[Ans. Dept. I: Rs. 12,195, Dept. II: Rs. 9,605]

14. Calcutta Engineering Co. has three production departments X, Y and Z and one Service department
S. From the following particulars calculate Labour Hour Rate of each of the departments X, Y and Z
:
Rs. Rs. Rs.
Rent 34,000 Depreciation on machinery 22,000 Canteen Expenses 5,700
Power 18,400 Indirect Wages 5,300 Electricity 4,600
Further information:
X Y Z S
Floor Space (sq. metre) 2,000 3,000 2,500 1,000
Light points 18 12 10 6
Cost of machines (Rs.) 80,000 50,000 60,000 10,000
H. P hours ratio 3 2 4 1
No. of workers 7 5 5 2
Direct wages (Rs.) 15,000 16,000 18,000 4,000
There were 125 working days of 8 hours each. Service rendered by the service department are to be
apportioned to the production department as X: 50%, Y: 25%, Z: 25%.
Ans. X Y Z
Overhead (Rs.) 33,990 28,615 31,395
Labour Hour Worked 7,000 5,000 5,000
Labour Hour Rate (Rs.) 4.856 5.723 6.279

15. Bharat Engineering Works has three production departments A, B and C and one service department
S. From the under-mentioned particulars calculate labour hour rate for each of the production
departments:
Expenses for the period of 12 months:
Rs. Rs. Rs.
Rent 36,000 Indirect Wages 5,200 Electricity 5,600
Power 8,250 Depreciation on machinery 22,000 Canteen expenses 6,500
Additional information:
A B C S
Light Points (Nos.) 7 7 9 5
Floor space (sq. 300 250 450 200
metre) 65 30 30 40
H.P. of Machine 2 3 6 2
No. of workers 12,000 14,000 18,000 8,000
Direct Wages (Rs.) 50,000 60,000 80,000 10,000
Cost of machine (Rs.)
Working days : 200 days of 8 hours each.
Service rendered by service department S to production department A. B and C is 30%, 20%, 50%
respectively. [Ans. A – Rs. 8.54; B – Rs. 4.98; C – Rs. 4.20]
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16. Moonlight Engineering Company has three production departments: A, B and C and one service
department S.
Following are the particulars of a month of 25 working days of 8 hours each. Calculate the labour
hour rate for each of the production departments:
Rs. Rs.
Indirect Wages 9,000 Canteen Expenses 1,800
Rent 8,800 Lighting 2,200
Depreciation @ 12%, p.a.
Other information :
Dept. A Dept. B Dept. C Dept. S
Indirect Materials (Rs.) 1,735 930 935 300
No. of Workers 20 25 30 15
Area (sq. metre) 100 100 150 50
Direct Wages (Rs.) 8,000 10,000 12,000 6,000
No. of Electric points 40 30 20 20
Value of Assets (Rs.) 5,000 6,000 6,000 3,000
Services rendered by the service department S to production departments A, B & C is in the ratio of
2 : 2 : 1 respectively. [Ans. A Rs. 2.76; B Rs. 2.13; C Rs. 1.70]

17. In a certain factory, there are two production departments X and Y, two service departments A and
B. Total expenses of the service department A are apportioned between X, Y and B in the ratio of 3
: 2 : 1, and the expenses of the service department B are allocated between X and Y equally. From
the following particulars calculate the overheads to be allocated to production departments X and Y:
X Y A B
Floor space (sq. ft.) 5,000 4,000 1,000 2,000
Assets (Rs. in lakh) 10 5 3 1
H.P. of Machine 100 50 40 10
No. of workers 100 50 50 25
Light Points 25 15 10 10
Direct Wages (Rs.) 10,000 8,000 5,000 3,000
Direct Materials (Rs.) 15,000 10,000 4,000 –––
Total Expenses and charges are
Rs. Rs. Rs.
Depreciation 38,000 Power 12,500 Canteen expenses 5,400
Rent, Rates & Taxes 18,000 Insurance on assets 9,500 Electricity 3,600
[Ans. X Rs. 60,821; Y Rs. 38,179]

18. In a manufacturing concern, there are four departments viz. A, B, C and D. A and B are production
departments C and D are service departments. C renders services worth Rs. 12,000 to D and balance
to A and B in the ratio of 3 : 2. D renders services to A and B in the ratio of 9 : 1. The overhead
expenses incurred in a year are as follows :
Rs. Rs. Rs.
Depreciation 95,000 Insurance 7,600 Canteen expenses 5,400
Rent, Rates & Taxes 18,000 Power 10,000 Electricity 2,400
Following Further information are given regarding the departments:
A B C D
Direct Materials (Rs.) 6,000 5,000 3,000 2,000
Direct Labour (Rs.) 20,000 10,000 10,000 5,000
Floor space occupied (Sq. ft.) 5,000 4,000 1,000 2,000
Value of Assets (in lakh) 10 5 3 1
H. P. of Machines 1,000 500 400 100
No. of workers 100 50 50 25
Light and Fan Points 50 30 20 20
From the above particulars prepare a statement showing overhead expenses of production
departments A and B after redistribution of service departments expenses.
[Ans. A – Rs. 1,09,290; B – Rs. 49,110]
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19. From the following particulars, calculate the overheads allocable to production departments P & Q.
There are also two service departments S 1 and S2. S1 renders service worth Rs. 6,000 to S 2 and the
balance to P and Q as 3 : 2. S2 renders service to P and Q as 9 : 1.
P Q S1 S2
Floor space (sq. ft.) 2,500 2,000 500 500
Assets (Rs. in lakh) 5 2.5 1.5 0.5
H. P. of machines 500 250 200 50
No. of workers 100 50 50 25
Light and fan points 50 30 20 20
The expenses and charges:
Rs. Rs. Rs.
Depreciation 95,000 Canteen Expenses 5,400 Power 10,000
Insurance 7,600 Rent, Rates and Taxes 18,000 Electricity 2,400
[Ans. P – Rs. 92,926; Q – Rs. 45,474]

20. In a factory, the following particulars have been found for a three-months period. Compute the
departmental overhead rates for each of the production department, assuming that overheads are
recovered as a percentage of direct wages.
Production Department Service Department
A B C D E
Direct Wages (Rs.) 2,000 3,000 4,000 1,000 2,000
Direct Materials (Rs.) 1,000 2,000 2,000 1,500 1,500
No. of staff 100 150 150 50 50
Electricity (kwh.) 4,000 3,000 2,000 1,000 1,000
Light Point (Nos.) 10 16 4 6 4
Assets Value (Rs.) 60,000 40,000 30,000 10,000 10,000
Area occupied (Sq. mt.) 150 250 50 50 50
The expenses for the period were:
Rs. Rs.
Power 550 Depreciation 15,000
Lighting 100 Repairs & Maintenance 3,000
Stores Overhead 400 General Overhead 6,000
Amenities to staff 1,500 Rent & Taxes 275
Expenses of the Service Department E are to be apportioned to Production Departments on the basis
of Direct Wages and that of the Service Department D, in the ratio of 5 : 3 : 2.
[Ans. % of overhead on direct wages: A – 622.2%, B – 350.77% , C – 246.45%]

21. The following information is available for 3 months ending on 31.3.2015 of a large manufacturing
concern. You are required to calculate the departmental overhead rates for each production
department, assuming that the overheads are recovered as a percentage of direct wages.
The expenses for 3 months: Rent and Rates – Rs. 5,000; Repairs and Maintenance – Rs. 6,000;
Depreciation – Rs. 30,000; electricity Charges – Rs. 2,000; Power – Rs. 12,000; supervision Expenses
– Rs. 3,000; General Expenses Rs. 1,500.
Production Departments Service Departments
A B C D E
Direct Wages (Rs.) 12,000 8,000 5,000 3,000 2,000
Floor Space (sq. metres) 8,000 6,000 4,000 4,000 3,000
Value of Machines (Rs.) 1,00,000 80,000 60,000 40,000 20,000
HP of Machines 50 30 20 20
No. of Light Points 80 40 40 30 10
Total expenses of Service Department E are to be distributed equally and those of Service Department
D are to be distributed in the ratio of 2 : 2 : 1 over the Production Department A, B and C.
[Ans. A – Rs. 27,540; B – Rs. 21,740; C – Rs. 15,220]
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22. The following figures are extracted from the accounts of Calcutta Manufacturing Co. for the month
of January, 2014.
Production Departments Service Departments
P1 P2 S1 S2
Indirect Materials (Rs.) 280 140 270 350
Indirect Wages (Rs.) 324 312 296 190
Area (Sq. metre) 400 200 100 200
Value of assets (Rs.) 8,000 4,000 7,000 5,000
Electricity (Kwh) 4,000 3,000 1,000 1,000
No. of employees 150 100 75 100
Labour hours 5,000 4,000 ––– –––
From the above information and following data, prepare overhead recovery rates for the production
departments on the basis of labour hours. The expenses of service department should be apportioned
in the ratio of S1 in 10 : 3, S2 in 3 : 2 to production departments P1 and P2 respectively.
Rs. Rs.
Power and Light 3,000 Rent & Rates 500
Supervision charges 2,200 Insurance on assets 60
Depreciation @ 12%, p.a. [Ans. P 1 – Rs. 1.02; P2 – Re. 0.77]

23. MRK Ltd. has three production departments – X1, X2, and X3 and two service departments – S1 and
S2. The following figures are extracted from the records of the company for a particular period :
Rs. Rs.
Rent and Rates 5,000 Power 1,500
Depreciation on Machinery 10,000 Canteen Expenses 650
Lighting Expenses 600 Sundry Expenses 10,000
Other information:
Production Depts. Service Depts.
X1 X2 X3 S1 S2
Floor Area (Sq. ft.) 2,000 2,500 3,000 2,000 500
No. of Light Points 10 15 20 10 5
No. of Employees 25 20 10 5 5
Direct Wages (Rs.) 3,000 2,000 3,000 1,500 500
Indirect Wages (Rs.) 250 500 100 250 150
H. P. of Machines 60 30 50 10 –––
Value of Machines (Rs.) 60,000 80,000 1,00,000 5,000 5,000
Production Hours Worked 2,000 2,500 3,000 ––– –––
Expenses of service departments S1 and S2 are apportioned as below:
X1 X2 X3 S1 S2
S1 2 2 1 –– ––
S2 2 1 2 –– ––
You are required to:
(a) Compute Overhead Absorption Rate per production hour of each department.
(b) Total Cost of Product ‘YZ’ which is processed through departments X 1, X2 and X3 for 5 hours, 4
hours and 3 hours respectively. The Material Cost for the product ‘YZ’ is Rs. 5,000, Direct
Labour Cost is Rs. 20,000, Royalty on production Rs. 2,000 and Chargeable Expenses Rs. 1,000.
[X1 – Rs. 5.08, X2 – Rs. 3.93, X3 – Rs. 3.67. Total Cost Rs. 28,052.13]

24. From the following particulars, show distribution of overhead and calculate overhead rate per labour
hour after redistribution of service departments expenses:
Production Department Service Department
Shop I Shop II Shop III Tool Stores Factory
Room Office
Direct Materials (Rs.) 1,80,000 1,20,000 1,00,000 ––– ––– –––
Direct Wages (Rs.) 1,00,000 80,000 60,000 40,000 ––– –––
Indirect Labour (Rs.) 25,200 35,200 32,000 22,200 9,000 6,600
Indirect Materials (Rs.) 24,000 36,000 12,000 7,200 9,600 3,600
Value of Machine (Rs.) 1,50,000 2,70,000 60,000 9,000 15,000 15,000
Area (Sq. mt.) 2,000 1,500 3,000 1,000 1,500 1,000
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Effective (H. P.) 180 180 ––– 40 ––– –––
Labour Hours 60,000 60,000 40,000 ––– ––– –––
Machine Hours 32,000 24,000 12,000 ––– ––– –––
No. of Employees 600 600 400 100 100 200
Other information regarding the production:
Rs. Rs. Rs.
Insurance 12,000 Factory Rent 60,000 Power 54,000
Depreciation 60,000 Light & Heat 24,000
The expenses of Service Department are to be apportioned to the shop as follows:
Tool Room Based on value of machine Factory Office Based on direct wages
Stores Based on direct labour hours
[Ans. Shop 1 – Rs. 2.64; Shop 2 – Rs. 3.54; Shop 3 – Rs. 2.54]

OVERHEAD – REPEATED OR RECIPROCAL DISTRIBUTION AND

SIMULTANEOUS EQUATION METHOD

25. A company has three production departments and two service departments. For the month of March
2008, the departmental expenses were as follows:
Production Departments: A – Rs. 10,000, B – Rs. 15,000, C – Rs. 12,000.
Service Departments : X – Rs. 25,000, Y – Rs. 10,000.
The expenses of service departments are apportioned as follows:
A B C X Y
X 40% 30% 20% –– 10%
Y 30% 40% 10% 20% –––
Show the apportionment of service departments expenses among production departments.
[Ans. A: Rs. 24,847; B Rs. 28,367; C Rs. 18,786]

26. A company has three production departments and two service departments. For the month of March,
2015 the departmental expenses were as follows:
Production Departments : A – Rs. 10,000, B – Rs. 15,000, C – Rs. 12,000.
Service Departments : X – Rs. Rs. 2,500, Y – Rs. 1,000.
The expenses of service departments are apportioned as follows:
A B C X Y
X 40% 30% 20% ––– 10%
Y 30% 40% 10% 20% –––
Prepare a statement showing the distribution of service departments expenses to production
departments based on reciprocal service. [Ans. A: Rs. 11,485; B: Rs. 16,337; C: Rs. 12,678]

27. A company with three production departments and two service departments has the following
balances on a departmental distribution summary of expenses:
Production Departments Rs. Service Departments Rs.
Manufacturing 48,000 Power 6,000
Assembly 42,000 Administration 10,000
Finishing 36,000
The expenses of the service departments are charged out on the following basis :
Service Departments Production Departments Service Departments
Manufacturing Assembly Finishing Power Administration
Power 40% 25% 15% ––– 20%
Administration 35% 30% 20% 15% –––
You are required to show the apportionment of service department expenses to the production
departments. [Ans. Manufacturing: Rs. 55,134, Assembly: Rs. 47,397, Finishing Rs. 39,469]

28. A factory has three production departments A, B and C and also two service departments X and Y.
The primary distribution of the estimated overheads in the factory has just been completed. These
details and the quantum of service rendered by the service departments, to the other departments are
given below:
A B C X Y
Primary distribution (Rs.) 2,40,000 2,10,000 2,50,000 1,40,000 96,000
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Services rendered by :
Department X 30% 20% 35% ––– 15%
Department Y 25% 40% 25% 10% –––
Prepare a statement showing the distribution departments using the following two methods:
(a) Repeated distribution method; and (b) Simultaneous equation method.
[Ans. A – Rs. 3,15,259; B – Rs. 2,87,889; C – Rs. 3,32,852]

29. A factory is having three production departments: A, B and C, and two service departments: boiler
house and pump-room. The boiler-house has to depend upon the pump-room for supply of water and
pump-room, in its turn, is dependent on the boiler-house for supply of steam power for driving the
pump. The expenses incurred by the production departments during a period are: A Rs. 8,00,000; B
Rs. 7,00,000; and C Rs. 5,00,000. The expenses for boiler-house is Rs. 2,34,000 and for the pump-
room is Rs. 3,00,000.
The expenses of the boiler-house and pump-room are apportioned to the production departments on
the following basis :
A B C Boiler-house Pump-room
Expenses of boiler-house 20% 40% 30% ––– 10%
Expenses of pump-room 40% 20% 20% 20% –––
Show clearly as to how the expenses of boiler-house and pump-room would be apportioned to A, B
and C departments. Use algebraical equation.
[Ans. A Rs. 9,92,000; B Rs. 8,86,000; C Rs. 6,56,000]

30. X Ltd. is a manufacturing company having three production departments A, B and C and two service
departments X and Y. the following is the budget for December, 2010:
Total A B C X Y
Rs. Rs. Rs. Rs. Rs. Rs.
Direct Materials 3,000 6,000 12,000 6,000 3,000
Direct Wages 15,000 6,000 24,000 3,000 6,000
Factory Rent 12,000
Power 7,500
Depreciation 3,000
Other overhead 27,000
Additional information:
Area (Sq. m.) 500 250 500 250 500
Value of Assets (Rs. in lakh) 20 40 20 10 10
Machine hours 1,000 2,000 4,000 1,000 1,000
H. P. of Machines 50 40 20 15 25
A technical assessment for the apportionment of expenses of service departments is as under:
A B C X Y
Service Dept. X 45% 15% 30% ––– 10%
Service Dept. Y 60% 35% ––– 5% –––
You are required to compute Machine hour rates of the production departments.
[Ans. A: Rs. 25.446; B: Rs. 9.758; C: Rs. 5.6345]

31. A Ltd. has three production departments A, B and C and two service departments X and Y. The
following data arc extracted from the records of the company for a particular given period :
Rs. Rs. Rs.
Rent & Rates 25,000 Indirect Wages 7,500 Depreciation on machinery 50,000
General lighting 3,000 Power 7,500 Sundries 50,000
Other information:
A B C X Y
Direct Wages (Rs) 15,000 10,000 15,000 7,500 2,500
H. P. of machines 60 30 50 10 –––
Cost of Machinery (Rs.) 3,00,000 4,00,000 5,00,000 25,000 25,000
Floor space (Sq. ft.) 2,000 2,500 3,000 2,000 500
No. of light points 10 15 20 10 5
Production hours worked 6,226 4,028 4,066 ––– –––
Expenses of the service departments S1 and S2 are apportioned as below:
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A B C X Y
X 20% 30% 40% –– 10%
Y 40% 20% 30% 10% –––
You are required to:
(a) compute overhead rate per production hour of each production department.
(b) Determine the total cost of Product P which is processed for manufacture in department A, B and
C for 4 hours, 5 hours, 3 hours respectively, given that its direct material cost is Rs. 250 and
direct labour cost is Rs. 150.
[Ans. (a) A – Rs. 7.50; B – Rs. 11.25; C – Rs. 15.00. (b) Total cost Rs. 531.25]

32. M Ltd. has three production departments and two service departments. The overhead analysis sheet
gives the following overhead costs:
Production Rs. Service Department Rs.
Department 27,600 D 12,600
A 43,800 E 10,200
B 25,800
C
The machine hours in different departments are: A – 3,284 hrs.; B – 2,606 hrs. and C – 1,752 hrs.
The expenses of service departments are apportioned as follows:
A B C D E
D 30% 40% 20% –– 10%
E 10% 20% 50% 20% ––
You are required to calculate:
(a) The Machine Hour Rate; and
(b) The Cost of Production of a product requiring Rs. 400 for Materials and Rs. 600 for Labour. The
product has to pass departments A, B and C for 5, 4 and 5 hours respectively
[Ans. Total Overhead A – Rs. 33,251; B – Rs. 52,114 and C – Rs. 34,635; Machine Hour Rate: A –
Rs. 10.13; B – Rs. 20.00 and C – Rs. 19.77. Cost of Production Rs. 1,229.5]

33. A Company has three production departments – A, B and C and two Service Department –D and E.
The following figures are extracted from the records of the company for a particular period:
Rs. Rs. Rs.
Rent & Rates 5,000 General Lighting 600 Indirect Wages 1,500
Depreciation on Machinery 10,000 Power 1,500 Sundries 10,000
The following further details available:
A B C D E
Floor area (Sq. ft.) 2,000 2,500 3,000 2,000 500
No. of light points 10 15 20 10 5
Direct Wages (Rs.) 3,000 2,000 3,000 1,500 500
H. P. of Machines 60 30 50 10 –––
Value of Machineries (Rs.) 60,000 80,000 1,00,000 5,000 5,000
Working Hours 6,226 4,028 4,066 ––– –––

Expenses of service departments S1 and S2 are apportioned as below:

A B C D E
D 20% 30% 40% ––– 10%
E 40% 20% 30% 10% ---
Compute Overhead Recovery Rate per hour. What is the total cost of an article, if its raw material
cost is Rs. 50, labour cost is Rs. 30 and it passes through departments A, B and C for 4, 5 and 3 hours
respectively? [Ans. A – Rs. 1.50, B – Rs. 2.25, and C – Rs. 3.00. Total Cost Rs. 106.25]