Determine suitable overhead absorption rates for the milling

Assignment Help Cost Accounting

Reference no: EM132976827

Question: You are the Cost Accountant of an industrial concern and have been assigned the duty of preparing a cost accounting system. Initially it has been decided to prepare three production cost centers and two service cost centers.

The subsequent data relating to the next accounting period have been estimated as follows:

Production Cost Centres Service Cost Centres Total

Milling

Assembly

Spraying

Stores

Maintenance

No. of employees

150

Labour hours

1,510

3,320

950

252

595

6,627

Plant & Machines values

225,000

75,000

45,000

17,000

85,000

447,000

Area (m²)

7,500

10,000

3,500

500

1,000

22,500

Material requisitions

1,400

300

250

550

2,500

Maintenance hours (minor works)

150

KWH ('000)

300

170

600

Machine hours

8,400

1,100

300

9,800

During the period the following data were recorded

Milling

Assembly

Spraying

Stores

Maintenance

Total

Indirect materials

Indirect labour

Maintenance works

2,500

5,250

18,500

1,000

2,500

7,500

1,500

2,250

4,500

300

4,250

1,700

11,750

7,000

26,000

30,500

The following details were obtained from the accounts relating to the period:

Fire Insurance	1,250
Power	4,500
Heating and Lighting	2,000
Rates	1,800
Machine depreciation	8,400
Machine Insurance	850
Canteen deficit	4,250
Balance of maintenance costs (excl. major works)	17,500

Required:

(a) Prepare an overhead analysis sheet showing how overhead costs should be apportioned between the departments.

(b) Determine suitable overhead absorption rates for the Milling, Spraying and Assembly departments, stating clearly the overhead absorption basis used.

Reference no: EM132976827

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