Prepare an overhead analysis using the data

Reference no: EM133395603

Question: Prepare an overhead analysis using the following data and calculate suitable overhead absorption rates for the Milling, Assembly and Spraying departments. The data relate to one accounting period.

Basic data

Production cost centres
Service cost centres

Milling
Assembly
Spraying
Stores
Maintenance
totals

No of employees
30

75
25
6
14
150

Labour hours
1 510
3 320
950
252
595
6 627

Plant and machinery 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 work)
75
30
45

150

KWH ('000)
300
70
50
10
170
600

Machine hours
8 400
1 100
300

9 800

During the period the following data was recorded:

Indirect materials
$2 500
$1 000
$1 500
$300
$1 700
$7 000

Indirect labour
$5 250
$2 500
$2 250
$4 250
$11 750
$26 000

Major maintenance work
$18 500
$7 500
$4 500

$30 500

The followings 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 (exclu. Major works) 17 500

All apportionment follows a similar principle. For example, the total fire and machine insurance of $2 100 is divided by the total plant value of $447 000 which is then multiplied, in turn, by the value of the plant in each cost centres.

The secondary apportionment is carried out using a net plant value of $345 000 i.e. less the values in stores and maintenance.

The additional complications which can arise with Service Depts. are dealt with below.

Maintenance is apportioned on Plant Values because maintenance hours are not available for the service C.C.s which naturally must have some maintenance.

Reference no: EM133395603

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