MGT 305

ACTIVITY

Cathy PLC is a manufacturing company with three production departments: Machining,

Assembling and Finishing along with two service departments: Administration
Department and Stores. The following cost estimates for the period 31st March 2018
have been made available.

Description Machining Assembling Finishing Stores Administration Total

(Rs) (Rs) (Rs) (Rs) (Rs) (Rs)
Factory Rent
- - - - - 1,200
and Rates
Electricity
- - - - - 3,000
for Power
Electric
- - - - - 400
Lighting
Labour
- - - - - 6,000
Welfare
Machinery
- - - - - 12,000
Depreciation
General
- - - - - 10,000
Overheads
Stores
- - - - - 1,000
Overhead
Indirect
- 500 500 - - 1,000
Wages

Overhead apportionment bases:

Machining Assembling Finishing Stores Administration Total

Employees Nos 400 300 300 100 100 1,200
KW.
Electricity 16,000 12,000 12,000 4,000 6,000 50,000
H
Light
Nos 20 30 30 10 10 100
Points
Book
Value of Rs. 100,000 60,000 40,000 20,000 20,000 240,000
Machinery
Floor Sq.
1,200 1,000 800 600 400 4,000
Space feet
Stores
Nos 50 20 30 - - 100
requisition
Required:

a) Prepare Overhead Analysis Sheet showing the allocation and apportionment of

overhead cost to the five cost centers, showing the apportionment base.

b) The expenses of Service departments are to be apportioned as follows:

Machining Assembling Finishing Stores Administratio
(%) (%) (%) (%) n (%)

Stores 45 15 30 - 10
Administration 50 35 10 5 -

i. Apportion the overhead of the two service departments among production

departments using the Simultaneous Equation Method.

ii. Calculate the Overhead Absorption Rates in respect of three production

departments using the following information.

Total Machine hours in Machining Department – 50,000

Total Labour hours in Assembling Department – 25,000
Total Labour hours in Finishing Department – 30,000

c) What will be the total cost of a product with the prime cost of Rs.100, which
passes through Machining, Assembling and Finishing Departments for 2,3 and 4
hours respectively?