Reference no: EM133064426

Question 1: Grand stands Ltd manufactures sheet music stands in two separate departments: Cutting and Welding. The following data relate to the year just ended:

	Cutting Dept	Welding Dept	Total plant
Budgeted manufacturing overhead	$40 000	$80 000	$120 000
Budgeted machine hours	16 000	64 000	80 000
Budgeted direct labour hours	20 000	10 000	30 000

The following information is related to the production of one unit product A and B.

Product A
	Cutting Dept	Welding Dept	Total plant
Machine hours	2.5	4.0	6.5
Direct labour hours	4.0	1.0	5.0

Product B
	Cutting Dept	Welding Dept	Total plant
Machine hours	3	6	9.0
Direct labour hours	4.5	1.5	6.0

Required:

Calculate manufacturing overhead cost of the product A and B using:
a) Predetermined plantwide rate based on direct labour hours
b) Predetermined plantwide rate based on machine hours

Question 2:
Using the information given in lecture example 1, calculate overhead costs for Product A and Product B using departmental rates based on: Direct labour hours for Cutting department and Machine hours for Welding department.

	Cutting Dept	Welding Dept	Total plant
Budgeted manufacturing overhead	$40 000	$80 000	$120 000
Budgeted machine hours	16 000	64 000	80 000
Budgeted direct labour hours	20 000	10 000	30 000

The following information is related to the production of one unit product A and B.

Product A
	Cutting Dept	Welding Dept	Total plant
Machine hours	2.5	4.0	6.5
Direct labour hours	4.0	1.0	5.0

Product B
	Cutting Dept	Welding Dept	Total plant
Machine hours	3	6	9.0
Direct labour hours	4.5	1.5	6.0

Question 3: The Smith Company has two service departments, Plant Maintenance (S1) and Information System (S2 ), and two production departments, Machining ( P1) and Assembly (P2). The budgeted overhead costs incurred in each dep. are given as follows:

S1	S2	P1	P2
$84,000	$96,000	$100,000	$150,000

The following table provides the usage of the two support departments' output:

Service provided by:	Service Provided to:
	S1	S2	P1	P2
S1	-	30%	30%	40%
S2	20%	-	60%	20%

Required:
Allocate the budgeted OH costs from support dep. (S1 and S2) to production dep. (P1 and P2), using the direct method, step-down method and reciprocal method

Question 4: Chicago Pty Ltd manufactures gauges for dashboards. It has two production departments (P1 and P2) and three service departments (S1, S2 and S3). The service costs incurred are $180,000, $270,000 and 200,000 for S1, S2 and S3 respectively. The production costs incurred in P1 and P2 are $200,000 and 250 000 respectively. The usage of the three service departments is as follows:

Service provided by:	Service provides to:
	S1	S2	S3	P1	P2
S1	-	5%	5%	40%	50%
S2	-	-	10%	40%	50%
S3	5%	-	-	70%	25%

Required:
Allocate the overhead costs from support dep. (S1, S2 and S3) to production departments (P1 and P2), using the step-down method.

Question 5:

The Dexter Manufacturing Company has two production departments (P1 and P2) and two service departments (S1 and S2). The usage of the two service departments is as follows:

Service provided by:	Service Provided to:
	S1 $90,000	S2 $50,000	P1 $200,000	P2 $250,000
Allocate S1	-	10%	60%	30%
Allocate S2	20%	-	40%	40%

Required:

Allocate the overhead costs from support dep. (S1 and S2) to production dep. (P1 and P2), using the reciprocal method.