A manufacturing organisation has three production cost centres, the cutting department, the processing department and the finishing department, and two service cost centres, the stores and the canteen.
Budgeted information for the following 6 month period is available as follows:
£
Direct materials 155,200
Direct labour
Cutting 15,000
Processing 35,000
Finishing 10,000
Canteen 6,240 66,240
Indirect materials
Cutting 25,500
Processing 10,200
Finishing 7,300
Stores 3,000
Canteen 2,200 48,200
Indirect labour
Cutting 4,200
Processing 10,500
Finishing 3,000
Stores 12,800
Canteen 4,500 35,000
Rent 12,000
Supervisor's wages 12,000
Machinery insurance 3,300
Maintenance expenses 5,400
The following information is also provided:
|
|
Total
|
Cutting
|
Process'g
|
Finish'g
|
Stores
|
Canteen
|
|
Direct labour hours
|
8,600
|
2,730
|
4,550
|
1,320
|
-
|
-
|
|
Direct machine hours
|
11,100
|
6,500
|
1,900
|
2,700
|
-
|
-
|
|
Floor area
(sq m)
|
50,000
|
20,000
|
18,000
|
8,000
|
2,000
|
2,000
|
|
Maintenance hours
|
1,100
|
400
|
400
|
100
|
100
|
100
|
|
Materials requisitions
|
1,800
|
1,200
|
300
|
300
|
-
|
-
|
|
Number of employees
|
90
|
20
|
35
|
20
|
5
|
10
|
|
Supervisor's time in each department (hours)
|
960
|
480
|
360
|
90
|
30
|
0
|
|
Value of machinery
|
£150,000
|
£60,000
|
£50,000
|
£30,000
|
£5,000
|
£5,000
|
You are required to:
- Create an overhead schedule to show the allocation/ apportionment of the overheads to each of the production and service cost centres. Show all figures to the nearest whole £.
- Reapportion the service cost centre costs to the production cost centres, again showing all figures to the nearest whole £.
- Having collected all of the overheads in the production cost centres, calculate the overhead absorption rates for each cost centre, to two decimal places.
- Explain how these absorption rates will be used to charge the overheads into production and what adjustments may be required once the actual overhead figures are available.