AccountingQuestion 3Barns Ltd. has three production departments: A, B, and C, and two servicedepartments: Stores and Maintenance. The company absorbs its overhead costson a machine hour basis in depts. A and B, and a labour hour basis in departmentC. The entity apportions indirect wages using labour hours worked in eachdepartment. The company has budgeted its production overhead costs for theforthcoming year as follows:Indirect wagesDepreciation of plantRentPowerCanteen costsPlant insuranceThe following information is also available:Labour HoursPlant valueFloor area (sq.m)Machine hoursEmployeesStoresrequisitionsKWH ('000)A9,000$130,00040,000MaterialDirect Labour ADirect Labour BDirect Labour C12,0007510,000Machine hours AMachine hours B$96,000376,000147,00072,000123,000117,500100BC7,000 16,000$70,000 $20,00030,00020,00015,000608,000605,000502,00060Stores Main.4,0004,000$5,000 $10,00010,0005,000nil8nil40 kilos @ $5 per kilo10 hours @ $15 per hour4 hours @ $14 per hour12 hours @ $16 per hour151010Required:(a) Prepare an overhead cost analysis for the period concerned, showing clearlythe bases of apportionment used.4,000122,000(b) Calculate the overhead absorption rates for each of the three productiondepartments. (Re-apportion the maintenance costs on the basis of machinehours.)10(c) Calculate the selling price of a unit of product (to the nearest $) based on theestimates below and using the absorption rates calculated in (b) above. Thecompany requires a profit of 20% of the selling price.

Barns Ltd. has 3 production departments and 2 service departments. The overhead cost of production…

Required: (a) Prepare an overhead cost analysis for the period concerned, showing clearly the bases of apportionment used. (b) Calculate the overhead absorption rates for each of the three production departments. (Re-apportion the maintenance costs on the basis of machine hours.) (c) Calculate the selling price of a unit of product (to the nearest $) based on the estimates below and using the absorption rates calculated in (b) above. The company requires a profit of 20% of the selling price. Material Direct Labour A Direct Labour B Direct Labour C Machine hours A Machine hours B 40 kilos@ $5 per kilo 10 hours @ $15 per hour 4 hours@ $14 per hour 12 hours @ $16 per hour 15 10

Required: (a) Prepare an overhead cost analysis for the period concerned, showing clearly the bases of apportionment used. (b) Calculate the overhead absorption rates for each of the three production departments. (Re-apportion the maintenance costs on the basis of machine hours.) (c) Calculate the selling price of a unit of product (to the nearest $) based on the estimates below and using the absorption rates calculated in (b) above. The company requires a profit of 20% of the selling price. Material Direct Labour A Direct Labour B Direct Labour C Machine hours A Machine hours B 40 kilos@ $5 per kilo 10 hours @ $15 per hour 4 hours@ $14 per hour 12 hours @ $16 per hour 15 10

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 28E: Minor Co. has a job order cost system and applies overhead based on departmental rates. Service...

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