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Overheads Practice Question (shorten)

The document outlines the overhead budgeting process for three companies: AJFA & Co, RS Company, and Faraz Manan Company, detailing their cost center expenses and the methods for apportioning these overheads to production departments. Each company is required to prepare allocation and apportionment sheets, as well as reapportionment sheets using different methods such as direct allocation, step down, and simultaneous equations. The document provides specific data on direct wages, indirect wages, consumable materials, and other overhead costs for each company.

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5 views

Overheads Practice Question (shorten)

The document outlines the overhead budgeting process for three companies: AJFA & Co, RS Company, and Faraz Manan Company, detailing their cost center expenses and the methods for apportioning these overheads to production departments. Each company is required to prepare allocation and apportionment sheets, as well as reapportionment sheets using different methods such as direct allocation, step down, and simultaneous equations. The document provides specific data on direct wages, indirect wages, consumable materials, and other overhead costs for each company.

Uploaded by

tahazeshan900
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Practice Questions

Topic: Overheads
Question: 01
The AJFA & Co is preparing its production overhead budgets and therefore need to determine the
apportionment of these overheads to products. Cost center expenses and related information have been
budgeted as below:
Production department Service department
Total Machine Machine Assembly Canteen Maintenance
Shop A Shop B
Direct wages (Rs.) 518,920 128,480 99,640 290,800
Indirect wages (Rs.) 313,820 34,344 36,760 62,696 118,600 61,420
Consumable materials 67,600 25,600 34,800 4,800 2,400
(incl. maintenance)
Rent & rates (Rs.) 66,800
Building insurance (Rs.) 9,600
Heat & light (Rs.) 13,600
Power (Rs.) 34,400
Depreciation of machine 160,800
(Rs.)
Area (sq ft) 90,000 20,000 24,000 30,000 12,000 4,000
Value of machine (Rs.) 1,608,000 760,000 716,000 88,000 12,000 32,000
Power usage (%) 100 54 40 3 1 2
Direct labour hours 72,020 16,020 21,410 43,590
Machine usage hours 54,422 14,730 37,632 2,060

Cost of service departments: canteen and maintenance are apportioned to production departments only.
Required:
a. Prepare the allocation and apportionment sheet for AJFA & Co.
b. Prepare reapportionment sheet of overheads under direct allocation method
Question: 02
The RS company has provided you following data for its overheads. It is preparing its production overhead
budgets and therefore need to determine the apportionment of these overheads to products. Cost center
expenses and related information have been budgeted as below:

Production department Service department


Total A B C Canteen Maintenance
Direct wages (Rs.) 259460 64240 49820 145400
Indirect wages (Rs.) 156910 17172 18380 31348 59300 30,710
Consumable materials
(incl. maintenance) 33800 12800 17400 2400 1200
Rent & rates (Rs.) 33400
Building insurance (Rs.) 4800
Heat & light (Rs.) 6800
Power (Rs.) 17200
Depreciation of machine
(Rs.) 80400
Area (sq ft) 45000 10000 12000 15000 6000 2,000
Value of machine (Rs.) 804000 380000 358000 44000 6000 16,000
Power usage (%) 50 27 20 1.5 0.5 1
Direct labour hours 36010 8010 10705 21795
Machine usage hours 27211 7365 18816 1030
Production Departments Service Departments
A B C Canteen Maintenance
Number of employees 45 30 8 - 10
Machine hours 3,000 4,500 2,500 - -
Cost of service department canteen is transferred to maintenance department but maintenance department
cost is only transferred to production departments.
Required:
a. Prepare the allocation and apportionment sheet for RS Co.
b. Prepare reapportionment sheet of overheads under step down method.
Question: 03
Th e Faraz Manan company has provided you following data for its overheads. It is preparing its production
overhead budgets and therefore need to determine the apportionment of these overheads to products. Cost
center expenses and related information have been budgeted as below:
Production department Service department
Total A B C Canteen Boiler house
Direct wages (Rs.) 1037840 256960 199280 581600
Indirect wages (Rs.) 627640 68688 73520 125392 237,200 122,840
Consumable materials
135200 51200 69600 9600 4,800
(incl. maintenance)
Rent & rates (Rs.) 133600
Building insurance (Rs.) 19200
Heat & light (Rs.) 27200
Power (Rs.) 68800
Depreciation of machine
(Rs.) 321600
Area (sq ft) 180000 40000 48000 60000 24,000 8,000
Value of machine (Rs.) 3216000 1520000 1432000 176000 24,000 64,000
Power usage (%) 200 108 80 6 2 4
Direct labour hours 144040 32040 42820 87180
Machine usage hours 108844 29460 75264 4120

The costs of running the canteen are apportioned to each department on the basis of the estimated use of
the canteen by employees in each department. The costs of the boiler house are apportioned on the basis
of the estimated consumption of power by each department.
The service departments’ costs are therefore apportioned as follows:
Canteen Boiler House
% %
Production Department 1 40 30
Production Department 2 20 30
Production Department 3 30 20
Service Departments
Canteen - 20
Boiler house 10 -
Required:
(a) Prepare the statement showing the allocation of costs to the production departments using the
repeated distribution method.
(b) Also with the simultaneous equations method

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