Accounting for overheads

1. What is the order by which overheads are charged to the cost unit:

A. Absorb, Allocate, Apportion and Re-apportion.

B. Allocate, Apportion, Absorb and Re-apportion.
C. Allocate, Apportion, Re-apportion and Absorb.
D. Absorb, Re-apportion, Apportion and Allocate.

2. A company has the following budgeted and actual information:

Budget Actual
Production overhead $50,000 $60,000
Labour hours 12,500 13,600

What is the amount of under-/over-absorption?

A. $10,000 Over-absorption.
B. $10,000 Under-absorption.
C. $5,600 Over-absorption.
D. $5,600 Under-absorption.

3. A company has the following information regarding two departments:

Dept X Dept Y
Production overhead $100,000 $120,000
Machine hours 20,000 12,000
Labour hours 5,000 20,000

Calculate the appropriate overhead absorption rate for each of the departments:

Department
Department X Y
A. $20/lab $6/labour
our hour hour
B. $5/mach $10/machine
ine hour hour
C. $20/lab $10/machine
our hour hour
D. $5/mach $6/labour
ine hour hour

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4. A company has the following information regarding overhead costs:

Overhead costs
Rent and rates $25,000
Machine depreciation $100,000
Canteen costs $45,000

Other information

Production departments Service departments

A B X Y
Floor area (m2) 5,000 4,000 3,000 500
Machine hours 22,500 15,000 2,000 500
No. of employees 120 80 15 10

How much is apportioned to Production Department A:

A. $4,250
B. $15,000
C. $61,500
D. $90,250

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5. The company has two production cost centres and two service cost centres to which the
following costs have been allocated and apportioned.

Production departments Service departments

A B X Y
$50,000 $30,000 $10,000 5,000

We are further told that the service costs may be re-apportioned using the following
percentages:

Production departments Service departments

A B X Y
Departments X 70% 20% 10%
Departments Y 40% 55% 5%

What is the total cost after re-apportionment to department B?

A. $9,622
B. $5,377
C. $59,622
D. $35,377

6. A company T Ltd employs job costing to establish the full cost upon which a mark-up of
20% may be applied.
Details for product G:

Direct material costs $

X 4
Z 8
Direct labour/hr (2hours) 15

Production overheads are absorbed on labour hours at an overhead absorption rate of

$7/hours. Admin and selling overhead is absorbed at 10% of the production cost.

What is the selling price to quote for product G?

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A. $54.12.
B. $73.92
C. $77.00
D. $81.5

7. We know the following information regarding department X:

The actual overhead incurred was $23,500 and the actual labour hours worked were
2,000. We originally budgeted 2,400 labour hours to be worked. The under-
absorption is $3,500.

What is the budgeted overhead cost?

A. $16,000
B. $20,000
C. $24,000
D. $25,000

8. Canberra has established the following information regarding fixed overheads for the
coming month:

Budgeted information:
Fixed overheads: $180,000
Labour hours: 3,000 hours
Machine hours: 10,000 hours
Units of production: 5,000 units
Actual fixed costs for the last month were $160,000.

Canberra produces many different products using highly automated manufacturing

processes and absorbs overheads on the most appropriate basis.

What will be the pre-determined overhead absorption rate?

A. $16
B. $18
C. $36
D. $60

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9. The management accountant of Gympie Limited has already allocated and apportioned
the fixed overheads for the period although she has yet to reapportion the service centre
costs. Information for the period is as follows:

Production Service departments Total

departments
1 2 Stores Maintenance
Allocated and $17,500 $32,750 $6,300 $8,450 $65,000
apportioned
Work done by:
Stores 60% 30% - 10%
Maintenance 75% 20% 5% -

What are the total overheads included in production department 1 if the reciprocal
method is used to reapportion service centre costs?

A. $27,618.
B. $28,171.
C. $28,398.
D. $28,453.

A company has established the following budgeted fixed overheads for the

forthcoming period:

Bases of
$'000 apportionment
Heating and Lighting 12 Cubic capacity

Welfare costs 7 Number of employees

Power 42 Kwh usage
Total 61

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Other information:

Department 1 Department 2 Maintenance Total

Cubic capacity (m2) 6,000 7,500 2,500 16,000
Employees 20 30 6 56
(number)
35,000 25,000 60,000
28,000 48,500 76,500
40,000 39,000 79,000

The maintenance department splits its time between Department 1 and Department 2
on a ratio of 2:3.

The management accountant has partially completed an allocation and

apportionment statement:

Maintenanc
Department 1 Department 2 e
$ $ $
Heat and light 4,500 5,625 1,875
Welfare 2,500
Power 24,500
Total 31,500

10. What would be the total cost allocated and apportioned to Department 2 excluding the
reapportionment of the maintenance costs?

A. $21,250.
B. $26,875.
C. $27,625.
D. $29,500.

11. What would be the overhead absorption rate in Department 1 (to 3 decimal places)?

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A. $0.788/machine hour.
B. $0.814/machine hour.
C. $1.125/labour hour.
D. $1.163/labour hour.

12. A company has over absorbed fixed production overhead for the period by $6,000.
The fixed production overhead absorption rate was $8 per unit and is based on the
normal level of activity of 5,000 units. Actual production was 4,500 units.

What was the actual fixed production overheads incurred for the period?

A. $30,000.
B. $36,000.
C. $40,000.
D. $42,000.

13. A factory consists of two production cost centres (P and Q) and two services cost centres
(X and Y). The total allocated and apportioned overhead for each is as follows:

P Q X Y
$95,000 $82,000 $46,000 $30,000

It has been estimated that each service cost centre does work for the other cost
centres in the following proportions:

P Q X Y
Percentage of 40 40 _ 20
X allocation
Percentage of 30 60 10 _
Y allocation

After the reapportionment of service cost centre costs has been carried out using a
method that fully recognises the reciprocal service arrangements in the factory, what
is the total overhead for production cost centre P?

A. $122,400.
B. $124,716.

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C. $126,000.
D. $127,000.

14. An organisation absorbs overheads on a machine hour basis. The planned level of activity
for last month was 30,000 machine hours with a total overhead cost of $247,500. Actual
results showed that 28,000 machine hours were recorded with a total overhead cost of
$238,000.

What was the total under-absorption of overheads last month?

A. $7,000.
B. $7,500.
C. $9,500.
D. $16,500.

15. A company has the following information in relation to budgeted factory overhead costs
for the period:

Rent $50,000
Power $20,000
Machine depreciation $6,000

The cost should be apportioned across 2 production and 1 service cost centres , for
which the following information is available:

Production Dept Service Dept

A B C
Floor area (metres squared) 5,000 6,000 4,000
Power (kw usage) 36,000 25,000
Labour hours 10,000 20,000 8,000
Machine hours 42,000 30,000

What is the total overhead cost apportioned to Production Department A:

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A. $13,333.
B. $28,473.
C. $30,697.
D. $31,970.

16. A allocated and apportioned production overheads as follows:

Production Dept Service Dept

A B C D
Costs allocated & $45,000 $75,000 $32,000 $14,000
apportioned
% usage of Dept C 40% 50% - 10%
% usage of Dept D 30% 70% - -

What will the total cost for department B be when all costs have been reapportioned
from the Service Departments?
$____________________

17. The following fixed overheads have been allocated and apportioned for a given period:

A B C X Y
Costs allocated 15,750 18,500 12,000 15,000 16,500
and
apportioned
Work done by:
Service Dept X 40% 30% 20% 10%
Service Dept Y 50% 20% 15% 15%

What are the total overheads for Production Department B if the reciprocal method is
used to re-apportion Service Department X and Y?

A. $26,600
B. $18,289
C. $27,477

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D. $31,983

18. A company absorbs overheads at $2.5/machine hour. Budgeted hours were 48,000 for
12,000 units. Actual overheads incurred were $105,000. Actual machine hours were
50,000 for 14,000 units.

What was the over-absorption for the period?

A. $35,000.
B. $15,000.
C. $25,000.
D. $20,000.

19. A company has under-absorbed production overheads by $3,000 for a period.

Overheads are absorbed on a machine hour basis where the budgeted level of activity
was 2,500 machine hours.

Actual machine hours were 2000.

Actual overheads incurred were $19,000.
What is the budgeted overhead cost?
$______________

20. The following budgeted activity relates to production department A and B:

Department A Department B
Production Overheads $500,000 $350,000
Machine Hours 40,000 25,000
Labour Hours 20,000 30,000
Number of units 50,000 35,000

What are the appropriate overhead absorption rates for each department?

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Department A Department B
A. $12.50/Machine Hour $14.00/Machine Hour 21. A company
B. $25.00/Labour Hour $11,67/Labour Hour has 3
C. $12.50/Machine Hour $11.67/Labour Hour production
D. $25.00/Labour Hour $14.00/Machine Hour
department
for which the
following
information
is available:

Department 1 Department 2 Department

3
Budgeted overhead $40,000 $50,000 $20,000
Machine hours 25,000 30,000 10,000
Labour hours 13,000 18,000 15,000
Budgeted production (units) 30,000 31,000 17,000

Which of the following statements is not correct?

A. Overheads will be absorbed on a machine hour basis for Department 1.

B. Overheads will be absorbed on per unit basis for all departments.
C. Overheads will be absorbed on a labour hour basis for department 3.
D. Overheads be absorbed on a machine hour basis for Department 2.

22. A company has under-absorbed overheads for a particular period by $1,000.

Overheads are absorbed on a labour hour basis.

Actual overhead for the period were $21000.

Budgeted overheads were $16,000 and budgeted activity was 8,000 labour hours.

What was the actual number of labour hours worked?

_______________ hours

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23. A company has allocated and apportioned overheads for the period and has the following
information available:

Production Production Service Service

Department 1 Department 2 Department X Department Y
Costs $25,000 $10,000 $15,000 $5,000
% usage of 35% 65%
Department X
% usage of 40% 30% 30%
Department Y

What are the total overheads for Department 1 after Service Department overheads
have been re-apportioned?
$_________________

24. A manufacturing company has 3 production and 2 services cost centres. The total
allocated and apportioned overheads for each department are as follows:

Production Production Production Service Service

Department Department Department Department Department
1 2 3 A B
Costs $40,000 $32,000 $19,000 $15,000 $14,500
% 20% 20% 45% 15%
usage
of A
% 40% 25% 25% 10%
usage
of B

What are the total overheads for Production Department 1 after re-apportionment of
the Service Department overheads?

A. 30,766.
B. 39,591.

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C. 50,142.
D. 51,742.

25. A cost centre has an overhead absorption rate of $4.25 per machine hour, based on a
budgeted activity level of 12,400 machine hours.

In the period covered by the budgeted, actual machine hours worked were 2% more
than the budgeted hours and the actual overhead expenditure incurred in the cost
centre was $56,389.

What was the total over- or under- absorption of overheads in the cost centre for the
period?

A. $1,054 over-absorbed.
B. $2,635 under-absorbed.
C. $3,689 over-absorbed.
D. $3,689 under-absorbed.

26. A manufacturing company uses a machine hour rate to absorb production overheads,
which were budgeted to be $130,000 for 9,000 machine hours.

Actual overheads incurred were $128,480 and 8,800 machine hours were recorded.

What was the total under-absorption of production overheads?

A. $880.
B. $900.
C. $2,020.
D. $2,900.

27. An organization absorbs overheads on a machine hour basis. The planned level of activity
for last month was 30,000 machine hours with a total overhead cost of $247,500. Actual
results showed that 28,000 machine hours were recorded with a total overhead cost of
$238,000.

What was the total under absorption of overheads last month?

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A. $7,000.
B. $7,500.
C. $9,500.
D. $16,500.

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