Jardine Ltd is developing factory overhead rates for the coming year. Budgeted o
ID: 2522378 • Letter: J
Question
Jardine Ltd is developing factory overhead rates for the coming year. Budgeted overhead costs for the five factory departments are as follows:
Cost ($)
Cost Driver
Milling
79,500
Machine hours
Finishing
84,600
Direct labour hours
Maintenance
40,500
Repair hours
Factory storeroom
52,800
Requisitions
Factory office
37,800
No. of employees
Total
$295,200
Estimated operating statistics for the coming year are:
Departments
Repair hours
No. of Requisitions
No. of employees
Machine hours
Direct labour Hours
Production:
Milling
5,000
420
10
7,500
12,750
Finishing
2,500
240
8
4,000
11,250
Support:
Maintenance
400
80
2
Factory storeroom
600
40
2
Factory office
200
40
2
Total
8,700
820
24
11,500
24,000
Required:
( a ) Calculate a plant-wide overhead rate based on direct labour hours.
( b ) Calculate departmental overhead rates assuming the support departments' costs are allocated using the direct method.
Cost ($)
Cost Driver
Milling
79,500
Machine hours
Finishing
84,600
Direct labour hours
Maintenance
40,500
Repair hours
Factory storeroom
52,800
Requisitions
Factory office
37,800
No. of employees
Total
$295,200
Explanation / Answer
Solution a:
Total budgeted overheads = $295,200
Budgeted direct labor hours = 24000
Plant-wide overhead rate based on direct labor hours = Budgeted overhead / Budgeted direct labor hours
= $295,200 / 24000 = $12.30 per direct labor hour
Solution b:
From Service Department Cost Allocation - Direct Method Support Department Production Department Maintenance Factory Store room Factory Office Milling Finishing Direct charges of department $40,500.00 $52,800.00 $37,800.00 $79,500.00 $84,600.00 Maintenance (50:25) -$40,500.00 $27,000.00 $13,500.00 Factory store room (42:24) -$52,800.00 $33,600.00 $19,200.00 Factory office (10:8) -$37,800.00 $21,000.00 $16,800.00 Total $0.00 $0.00 $161,100.00 $134,100.00Related Questions
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