0% found this document useful (0 votes)
134 views7 pages

Absorption (Total) Costing Answers

The document discusses solutions to absorption costing, including overhead analysis sheets and calculation of overhead absorption rates. It provides examples of allocating and apportioning overhead and distinguishing the two concepts. Absorption rates are calculated for multiple departments based on budgets and allocation bases.

Uploaded by

Nalan Tafana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
134 views7 pages

Absorption (Total) Costing Answers

The document discusses solutions to absorption costing, including overhead analysis sheets and calculation of overhead absorption rates. It provides examples of allocating and apportioning overhead and distinguishing the two concepts. Absorption rates are calculated for multiple departments based on budgets and allocation bases.

Uploaded by

Nalan Tafana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

SOLUTIONS TO ABSORPTION (TOTAL) COSTING

QUESTION 1
(a & b) Overheads analysis sheet

Overhead Basis of Machine Assembly Maintenance Power Total


apportionment shop shop
$ $ $ $ $
Indirect materials Allocated 1 491 2 414 665 760 5 330
Indirect labour Allocated 3 534 4 581 11 410 3 365 22 890
Rent and rates Floor area 2 325 3 875 775 155 7 130
Supervision No. of employees 880 1 760 440 220 3 300
Plant depreciation Plant valuation 4 875 1 875 900 600 8 250
13 105 14 505 14 190 5 100 46 900
Re-apportionment
Power Units of power 3 570 1 020 510 (5 100)
16 675 15 525 14 700 –
Maintenance Maintenance hours 11 025 3 675 (14 700)
Budgeted overhead 27 700 19 200 – – 46 900

(c) Overhead Absorption Overhead:


Budgeted overhead
Machine shop =
Machine hours
$27 700
=
5 540

= $5/Machine hour

Budgeted overhead
Assembly shop =
Direct labour hours
$19 200
=
2 400

= $8/Direct labour hour


QUESTION 2
(a) Overhead analysis sheet

Overhead Basis of Moulding Assembly Paint shop Stores Total


apportionment
$ $ $ $ $
Rent Area 27 000 36 000 22 500 4 500 90 000
Lighting & heating Area 6 900 9 200 5 750 1 150 23 000
Insurance on premises Area 2 100 2 800 1 750 350 7 000
Canteen costs No. of employees 16 200 21 600 10 800 5 400 54 000
Depreciation Cost of machinery 12 000 6 000 3 000 – 21 000
64 200 75 600 43 800 11 400 195 000
Re-apportionment
Stores No. of requisition 5 320 3 800 2 280 (11 400)
Budgeted overhead 69 520 79 400 46 080 – 195 000

(b) Overhead Absorption Overhead:


Budgeted overhead
=
Number of working hours in each production department

$69 520
Moulding =
(30 people × 35 hours ×24 weeks)

= $2.76/hour

$79 400
Assembly =
(40 people × 35 hours ×24 weeks)

= $2.36/hour

$46 080
Paint shop =
(20 people × 35 hours ×24 weeks)

= $2.74/hour
QUESTION 3
(a) Distinguish between overhead allocation and overhead apportionment

Allocation Apportionment
Assignment of particular cost to a particular These costs are common to various departments
department or cost centre. and cannot be charged to a particular department
or cost centre.
No base is required for allocation of cost to a An equitable base is required for apportionment
department. It is a direct process. of cost to the production or services department.

(b) Overhead analysis sheet

Basis of Machining Assembly Maintenance Canteen


apportionment
$ $ $ $
Total overheads 400 000 310 000 190 000 100 000
Re-apportionment
Canteen No. of employees 50 000 40 000 10 000 (100 000)
450 000 350 000 200 000 –
Maintenance Maintenance hours 150 000 50 000 (200 000)
Budgeted overhead 600 000 400 000 – –

$600 000
(c) Machining department =
40 000

= $15/Machine hour

$400 000
Assembly department =
50 000

= $8/Direct labour hour

(d) Mutsa limited: Andromedia cost card

Machining Assembly Total


$ $ $
Direct materials 49 18 67
15 3 36 39
Direct labour [$12 × 60 hours & $12 × 3 hours]
Prime cost 52 54 106
Factory overheads [$15 × 2 & $8 × 3] 30 24 54
Total production cost 82 78 160
Add: Profit (20% of total cost) 16.40 15.60 32
Selling price 98.40 93.60 192
QUESTION 4
(a) (i) Cost centre is any unit of cost accounting selected with a view to accumulating all cost under that
unit.
(ii) Overhead under-absorption is when actual expenditure is more than the budgeted figure and/or
actual production is less than the planned level.
(iii) Margin of safety is the level by which sales can fall before a business starts making losses.

(b) (i) Overhead analysis sheet

Basis of Machine Assembly Maintenance Power house


apportionment Shop Shop department department
$ $ $ $
Total overheads 131 050 145 050 141 900 51 000
Re-apportionment
Power house Units of power 35 700 10 200 5 100 (51 000)
166 750 155 250 147 000 –
Maintenance Maintenance hours 110 250 36 750 (147 000)
Budgeted overhead 277 000 192 000 – –

Budgeted overhead
(ii) Machine shop =
Machine hours
$277 000
=
55 400

= $5/Machine hour

Budgeted overhead
Assembly shop =
Direct labour hours
$192 000
=
24 000

= $8/Direct labour hour

(iii) Zisco limited: Job A101 cost card

Machine shop Assembly Shop Total


$ $ $
Direct materials 2 000 8 000 10 000
Direct labour 10 000 5 000 15 000
Prime cost 12 000 13 000 25 000
Factory overheads [200 × $5 & 300 × $8] 1 000 2 400 3 400
Total production cost 13 000 15 400 28 400
Add: Profit (20% of total cost) 2 600 3 080 5 680
Selling price 15 600 18 480 34 080
QUESTION 5
(a) Overheads analysis sheet

Overhead Basis of Machining Assembly Maintenance Canteen Total


apportionment
$ $ $ $ $
Indirect wages No. of employees 216 667 346 666 65 000 21 667 650 000
Canteen No. of employees 13 333 21 333 4 000 1 334 40 000
Insurance of machine Machine cost 24 000 6 000 – – 30 000
Insurance of premise Premises area 12 500 9 375 2 344 781 25 000
Heating & lighting Premises area 17 000 12 750 3 188 1 062 34 000
Consumables Allocated 800 1 500 1 400 1 300 5 000
284 300 397 624 75 932 26 144 784 000
Re-apportionment
Canteen % 7 843 14 379 3 922 (26 144)
292 143 412 003 79 854
Maintenance % 59 890 19 964 (79 854)
Budgeted overhead 352 033 431 967 – – 784 000

Overhead Absorption Rate (OAR):


$352 033
Machining department =
250 000

= $1.41/Machine hour

$431 967
Assembly department =
300 000

= $1.44/Direct labour hour

(b) Machining department


$
Actual overhead 340 000
Absorbed overhead (1.41 × 270 000) 380 700
Over-absorbed 40 700

Assembly department
$
Actual overhead 445 000
Absorbed overhead (1.44 × 280 000) 403 200
Under-absorbed 41 800
QUESTION 6
(a) Overhead Analysis Sheet

Overhead Basis of apportionment Machining Finishing Stores Total

$ $ $ $
Depreciation of plant Value of plant 5 375 500 125 6 000
Lighting and heating Floor area (m2) 2 250 2 025 225 4 500
Plant insurance Value of plant 4 300 400 100 4 800
Rent Floor area (m2) 9 000 8 100 900 18 000
Supervision Number of employees 12 000 8 000 5 000 25 000
32 925 19 025 6 350 58 300
Re-apportionment
Stores No. of orders from stores 4 500 1 850 (6 350)
Budgeted overhead 37 425 20 875 – 58 300

(b) Overhead Absorption Rate (OAR):


$37 425
Machining department =
4 250

= $8.81/Machine hour

$20 875
Finishing department =
4 950

= $4.22/Direct labour hour

(c) Absorbed overhead = OAR × Actual hours


Machining department = $8.81 × 6 000
= $52 860
Finishing department = $4.22 × 5 000
= $21 100

(d) Machining department

$
Actual overhead 48 340
Absorbed overhead 52 860
Over-absorbed 4 520
Finishing department
$
Actual overhead 22 780
Absorbed overhead 21 100
Under-absorbed 1 680

You might also like