QUESTION 9 Moorisan Company has two production departments and two service depar
ID: 2436446 • Letter: Q
Question
QUESTION 9
Moorisan Company has two production departments and two service department.
Following information is given by the Accountant regarding their overheads for a period.
Omani Rials
Stores Overhead - 400
Motive Power - 1500
Electric lighting - 200
Labourwelfare - 3000
Depreciation – 6000
Repairs and Maintenance –1200
General Overheads –10000
Rent and Taxes - 600
Following additional information is also available:
Production Departments
Support Departments
A
B
C
X
Y
Direct Wages
Omani Rials
7000
6000
5000
1000
1000
Direct materials
Omani Rials
3000
2500
2000
1500
1000
Employees
Nos
200
150
150
50
50
Electricity
KWh
8000
6000
6000
2000
3000
Light Points
Nos
10
15
15
5
5
Assets Used
Omani Rials
50000
30000
20000
10000
10000
Area Occupied
Sqyds
800
600
600
200
200
Machine hours
Hrs
15000
10000
8000
1000
2000
Required
Apportion the overheads to each department using suitable basis
Reapportion Support department X expenses in the ratio of 4:3:3 an Support department Y in proportion to direct wages, to Production Departments A,B and C respectively
Calculate the absorption rates for the machine department using suitable basis.
Production Departments
Support Departments
A
B
C
X
Y
Direct Wages
Omani Rials
7000
6000
5000
1000
1000
Direct materials
Omani Rials
3000
2500
2000
1500
1000
Employees
Nos
200
150
150
50
50
Electricity
KWh
8000
6000
6000
2000
3000
Light Points
Nos
10
15
15
5
5
Assets Used
Omani Rials
50000
30000
20000
10000
10000
Area Occupied
Sqyds
800
600
600
200
200
Machine hours
Hrs
15000
10000
8000
1000
2000
Explanation / Answer
Apportionment of the overheads of service departments Department X (4:3:3) of Production Departments Support Departments Bases of Apportionment Total A B C X Y Direct Wages Direct Allocation $2,000.00 $1,000.00 $1,000.00 Direct materials Direct Allocation $2,500.00 $1,500.00 $1,000.00 Stores Overhead - Material consumed $400.00 $120.00 $100.00 $80.00 $60.00 $40.00 Motive Power - KWH $1,500.00 $480.00 $360.00 $360.00 $120.00 $180.00 Electric lighting - No of points $200.00 $40.00 $60.00 $60.00 $20.00 $20.00 Labour welfare - No of Employees $3,000.00 $1,000.00 $750.00 $750.00 $250.00 $250.00 Depreciation – Asset Value $6,000.00 $2,500.00 $1,500.00 $1,000.00 $500.00 $500.00 Repairs and Maintenance Asset Value $1,200.00 $500.00 $300.00 $200.00 $100.00 $100.00 General Overheads Wages $10,000.00 $3,500.00 $3,000.00 $2,500.00 $500.00 $500.00 Rent and Taxes Area $600.00 $200.00 $150.00 $150.00 $50.00 $50.00 Total $27,400.00 $8,340.00 $6,220.00 $5,100.00 $4,100.00 $3,640.00 Apportionment of the overheads of service departments Department X (4:3:3) of $4100 $1,640.00 $1,230.00 $1,230.00 -4100 Department Y wages (7:6:5) of $3640 $1,415.56 $1,213.33 $1,011.11 -3640 Total overhead of production Department $27,400.00 $11,395.56 $8,663.33 $7,341.11 $0.00 $0.00 Percentage of overhead to direct wages 162.79% 144.39% 146.82%
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