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Overhead distribution
Departmentalization
1 Process of dividing the factory into number of Segments Is called Departmentalization
P1 S1P2 P3 S1
Prod Departments Service Dept.
Departmentalization
2 Process of allocating and apportioning POHEs to different departments or
cost centers (Prod & Service )
P1 S1P2 P3 S1
Prod Departments Service Dept.
FactoryOverheads
Departmentalization
P1 S1P2 P3 S1
Prod Departments Service Dept.
FactoryOverheads
Allocation &Apportionment
Service Departments
Time-Keeping
RepairDepartment
MaintenanceDepartment
Canteen Purchase
Tool Room
BoilerHouse
PersonnelDepartment
Power House
Fire Protection
Stores
Transport
Distribution of Overhead
ALLOCATION APPORTIONMENT
SpecificCosts
CommonCosts
Distribution of Overhead
ALLOCATION
SpecificCosts
Allocating whole amount Of an item
of POHs to thedepartment for whichThe expenditure was
incurred
Distribution of Overhead
APPORTIONMENT
CommonCosts
Common costs are apportionedAmongst different departmentsor cost centers on some basis
Principal Basis of Apportionment Of Overheads
Floor Area
Capital Value Of Assets
Number Of Employees
Machine Hours
Direct Labour Hours
Light Points
Kilowatt Hours
Technical Analysis
BASIS FOR APPORTIONMENT
Rent, Rates & Taxes, Lighting & HeatingInsurance & depreciation of Building,
Cost of repairs & maintenance ofBuilding, Air Conditioning
Floor Area Occupied
Insurance & Depreciation on Plant &Machinery, maintenance of PM,Insurance on building, etc
CapitalValue
BASIS FOR APPORTIONMENT
No.OfEmployees
Repairs & Maintenance of Plant &Machinery
MachineHours
Welfare Expenses, time-Keeping ,pay-rollOffice, Canteen, Recreation, SupervisionMedical Expenses
BASIS FOR APPORTIONMENT
Light PointsOr
Kilowatt Hours
Direct Labour
Hrs
Work’s Manager’s Remuneration, Salary ofSupervisors etc
Electricity Charges
BASIS FOR APPORTIONMENT
Technical Estimate
Where not possible to apportion on some Bases Technical estimate is made
HorsePower Motive Power Expenses
BASIS FOR APPORTIONMENT
Store Keeping Expenses
Value orWeight ofMaterials
Transport Service ExpensesTruck MileageTonnageTruck HoursNo.Of Pakages
PRINCIPLES OF APPORTIONMENTPRINCIPLES OF APPORTIONMENT
Utility Utility ororServiceService
PrinciplePrinciple
Ability To PayAbility To Pay
Survey MethodSurvey Method
EfficiencyEfficiencyPrinciplePrinciple
PRINCIPLES OF APPORTIONMENTPRINCIPLES OF APPORTIONMENT
Utility Utility ororServiceService
PrinciplePrinciple
Service or Benefits received By the department
PRINCIPLES OF APPORTIONMENTPRINCIPLES OF APPORTIONMENT
Ability To PayAbility To Pay
What the Traffic can bearWhat the Traffic can bear
Basis of Sales or ProfitBasis of Sales or Profit
PRINCIPLES OF APPORTIONMENTPRINCIPLES OF APPORTIONMENT
Survey MethodSurvey Method
When Difficult to select BasisWhen Difficult to select Basis
Production Manager’s SalaryProduction Manager’s Salary(Time spent in Each Dept)(Time spent in Each Dept)
PRINCIPLES OF APPORTIONMENTPRINCIPLES OF APPORTIONMENT
EfficiencyEfficiencyPrinciplePrinciple
Out put as the basisOut put as the basis
Higher ProductionHigher ProductionLow Overhead RateLow Overhead Rate
Low ProductionLow ProductionHigh OH RateHigh OH Rate
Quick Check
Identify the Basis for following Overheads
RentPlant RepairsPowerDepreciation of BuildingBuilding RepairsInsurance Of BuildingFire Insurance of StockLighting ExpensesSupervisionPower ESIEmployer’s Cont. to PFAmenities To StaffCanteenGn. Overheads
Floor AreaValue of PlantMachine Hours/HP/VMValue Of BuildingValue Of BuildingFloor AreaValue Of StockNo.Of Light PointsNo.Of EmployeesKilowatt/Value of PlantDirect WagesDirect WagesNo.Of Employees/WagesNo.Of EmployeesDirect Wages
Summary Of Departmental Overhead Distribution
Particulars Basis Total (Rs)
Production Departments
A B C D(Rs) (Rs) (Rs) (Rs)
Rent Area(15:11:9:5) 2,000 750 550 450 250Plant Maintenance Value Of Mch. (4:3:2:1) 1,200 480 360 240 120Depreciation Value Of Mch. (4:3:2:1) 900 360 270 180 90Lighting Area(15:11:9:5) 200 75 55 45 25Insurance Stock Value(5:3:2) 1,000 500 300 200 --Employer's Cont to PF Wages (4:3:2:1) 300 120 90 60 30
Energy Value Of Mch. (4:3:2:1) 1,800 720 540 360 180Supervision No.Of Emp (6:4:3:2) 3,000 1,200 800 600 400
Total 10,400 4,205 2,965 2,135 1,095
Summary Of Departmental Overhead Distribution
Particulars Basis Total (Rs)
Production Dept.
A B C D(Rs) (Rs) (Rs) (Rs)
SD
Rent Area 10,000 3,750 2,750 2,250 1,250Repairs To Plant Value Of Plant 6,000 2,400 1,800 1,200 600Depreciation “ 4,500 1,800 1,350 900 450Lighting Light Points 1,000 375 275 225 125Supervision No Of Employees 15,000 6,000 4,500 3,000 1,500Fire Insurance Value Of Stock 5,000 2,500 1,500 1,000 -Power Value Of Plant 9,000 3,600 2,700 1,800 900ESI Wages 1,500 600 400 300 200
Total 52,000 21,500 15,27510,675 5,025
Redistribution of Overheads Reapportionment of OverheadsSecondary Distribution Of Overheads
JOIN KHALID AZIZ
ACCOUNTING(FINANACIAL & COST) OFICMAP STAGE 1,2,3,4 (NEW CLASSES)CA..MODULE B,C,DPIPFA (FOUNDATION,INTERMEDIATE,FINAL)ACCA-F1,F2,F3BBA,MBAB.COM(FRESH),M.COMMA-ECONOMICS..O/A LEVELSKHALID AZIZ….. 0322-3385752 0312-2302870 0300-2540827
ProductionDepartments
ServiceDepartments
Carry out the central purposes
of an organization.
Provide supportthat facilitates the
activities of production departments.
Service Department Cost Re-Apportionment
First, we identify the factor that drives costs in the
service department.
This cost driver is usedas the apportionment base.
The Need for Cost Re-Apportionment
How are servicedepartment costs
charged to operatingdepartments?
The Need for Cost Apportionment
Second, we measure theconsumption of the
apportionment base in theoperating departments.
The Need for Cost Apportionment
Third, we apportionthe service
department costbased on the
relative amount of the apportionment base
used in eachoperating department.
What happens toservice department
costs after theyare apportioned to
operatingdepartments?
The Need for Cost Apportionment
Apportioned service departmentcosts become a part ofthe overhead in each
operating department.
The Need for Cost ApportionmentFirst Stage Apportionment
Service department costs are apportioned to operating
departments.Service
Department(Cafeteria)
Service Department(Accounting)
Service Department(Personnel)
Operating Department(Machining)
Operating Department(Assembly)
The Products
The Need for Cost Apportionment
Service Department(Cafeteria)
Service Department(Accounting)
Service Department(Personnel)
Operating Department(Machining)
Operating Department(Assembly)
The Products
Second Stage Apportionment
Operating department overhead costs and apportioned service department costs are
applied to products.
Selecting Apportionment BasesPersonnel:Number ofemployees
Receiving:Units
handled
Security:Squarefootage
Power:Kilowatt
hours
Cafeteria:Number ofemployees
Custodial:Squarefootage
Accounting:Staffhours
Criteria
Easiest
Re- apportionment Basis
PurchaseDepartment
Stores
No of Purchase Orders or value of MaterialsPurchased for each Production Department
•Value or Quantity of Materials Issued•No. Of Materials Requisitions
Re- apportionment Basis
Internal Transport
inspection Inspection Hrs. Devoted to eachDepartment
Weight & Distance
Re- apportionment Basis
Time Keeping,SecurityCanteenWelfareRecreationMedicalPersonnelPay Roll
•Number Of Employees•Total Labour Hours or•Wages or Salaries
Re- apportionment Basis
MaintenanceDepartment
FactoryOffice No .Of Employees
Hrs. Devoted or Worked forEach Department
Re- apportionment Basis
Building Service Deptt
Boiler House % Of Steam Utilized
Relative Area Of Each Deptt
Interdepartmental Services
Problem
Re Apportioning costs when service departmentsprovide services to each other
Problem
Re Apportioning costs when service departmentsprovide services to each other
Solutions
Direct Method
Step method
Reciprocal method
Direct Method
Service Department(Cafeteria)
Service Department(Custodial)
Operating Department(Machining)
Operating Department(Assembly)
Interactionsbetween servicedepartments areignored and all
costs areallocated directly
to operatingdepartments.
Direct Method Example
Service Department Apportionment Base
Cafeteria Number of employeesCustodial Square feet occupied
Direct Method Example
Direct Method Example
Apportionment base: Number of employees
INR 360,000 ×20
20 + 30 = INR 144,000
Direct Method Example
Apportionment base: Number of employees
INR 360,000 ×30
20 + 30= INR 216,000
Direct Method Example
INR 90,000 ×25,000
25,000 + 50,000 = INR 30,000
Apportionment base: Square feet occupied
Direct Method Example
Apportionment base: Square feet occupied
50,000
25,000 + 50,000INR 90,000 × = INR 60,000
Items Basis Total(Rs.)
Production Department Service Department
P1 P2 P3 Office Workshop
Indirect wagesIndirect materialsGeneral overhead
Amenities to staff
Employer’s contribution to E.S.I. Power
Depreciation
Apportionment of workshop overheadApportionment of office overhead
ActualActual
Direct wages(4:5:6)
No.of employees(6:5:6:3:5)
Direct Wages(4:5:6)
H.P. of machineX
Machine hours worked
(6:16:15:1)15% of value of
machinery
Machine hours(2:4:3)
Direct wages(4:5:6)
25,00010,9501,500
12,500
1,200
3,800
15,750
3,0002,000
400
3,000
320
600
4,500
3,0003,000
500
2,500
400
1,600
5,250
4,0003,000
600
3,000
480
1,500
3,750
10,0001,100
-
1,500
- -
-
5,0001,850
-
2,500 -
100
2,250
70,700 13,820
2,600
3,360
16,250
5,200
4,200
16,330
3,900
5,040
12,600
-
(-12,600
11,700
(-) 11,700
-
Allocated overhead Total 19,780 25,650 25,270 - -
Overhead Analysis Sheet
Bharat Engineering Works Departmental Overhead Distribution Statement (For 12 Months)
Particulars of Expenses
Basis of Distribution
Total Rs.
Production Deptts. Service Dept.
A B C S
Rent
Power
Indirect wages
Depreciation of machinery Electricity
Canteen expensesDirect wages
Floor space(30:25:45:20)H.P. of machine(65:30:30:40)Direct Wages(12:14:18:8)Value of machine(50:60:80:10)Light points(7:7:9:5)No. of workers(2:3:6:2)Actual
36,000
8,250
5,200
22,000
5,600
6,500
8,000
9,000
3,250
1,200
5,500
1,400
1,000
---
7,500
1,500
1,400
6,600
1,400
1,500
---
13,500
1,500
1,800
8,800
1,800
3,000
---
6,000
2,000
800
1,100
1,000
1,000
8,000
91,550 21,350
+5,970
19,900
+3,980
30,400
+9,950
19,900
-19,900
Re-distribution of expenses of service department to the production departments on the basis of service rendered 30%: 20%:50%
Allocated overhead total (A)
Effective labour hours (see workings) (No. of worker x working hours) (B)
27,320 23,880 40,350 Nil
3,200 4,800 9,600
Labour hour rate (A ÷ B) 8.5375 4.975 4.203
Operating Department(Machining)
Operating Department(Assembly)
Step Method
Once a servicedepartment’s costsare apportioned,
other servicedepartment costsare not allocated
back to it.
Service Department(Cafeteria)
Service Department(Custodial)
Step Method
Service Department(Cafeteria)
Service Department(Custodial)
Operating Department(Machining)
Operating Department(Assembly)
Custodial willhave a new
total to Apportionto operating
departments; itsown costs plus
those costsallocated fromthe cafeteria.
Step Method
1 Identify the SD which renders service to larger No’s of other Deptts
2 Distribute its Costs to other Deptts , Including service Department
3 Identify the next service Department. Which renders service to the next largest No’s
4 Continue the process till Amount is Exhausted
5 If all SD renders service to = No of Departments. Than cost of SD with largest amount be taken first
JOIN KHALID AZIZ
ACCOUNTING(FINANACIAL & COST) OFICMAP STAGE 1,2,3,4 (NEW CLASSES)CA..MODULE B,C,DPIPFA (FOUNDATION,INTERMEDIATE,FINAL)ACCA-F1,F2,F3BBA,MBAB.COM(FRESH),M.COMMA-ECONOMICS..O/A LEVELSKHALID AZIZ….. 0322-3385752 0312-2302870 0300-2540827
Step Method Example
Service Department Apportionment Base
Cafeteria Number of employeesCustodial Square feet occupied
We will use the same data used in the direct method example.
Step Method Example
Apportion Cafeteria costs first sinceit provides more service than Custodial.
Apportion Cafeteria costs first sinceit provides more service than Custodial.
Step Method Example
INR 360,000 ×10
10 + 20 + 30= INR 60,000
Apportionment base: Number of employees
Step Method Example
INR 360,000 ×20
10 + 20 + 30= INR 120,000
Apportionment base: Number of employees
Step Method Example
INR 360,000 ×30
10 + 20 + 30= INR 180,000
Apportionment base: Number of employees
Step Method Example
New total = INR 90,000 original custodial cost plus INR 60,000 apportioned from the cafeteria.
Step Method Example
INR 150,000 ×25,000
25,000 + 50,000 = INR 50,000
Apportionment base: Square feet occupied
Step Method Example
INR 150,000 ×50,000
25,000 + 50,000 = INR 100,000
Apportionment base: Square feet occupied
Comparison of Methods
SECONDARY OVERHEAD DISTRIBUTION SUMMARY
Particulars Total Rs. Base Service Departments (Rs.) Production Departments
P Q R S X Y ZFactory overhead
Add :
Service
Dept.costs
P
Q
R
S
5,95,000
0
0
0
0
Given
No. of
Employees
(50:40:50:
100:125:85)
DLHs
Rs.80,000 in
(6:3:4:3:4)
Area
(Rs.1,33,000 in (10:30:15:
15)
DLHs (Rs.66,000 in 4:3:4)
45,000
-45,000
75,000
5,000
-80,000
1,05,000
4,000
24,000
-1,33,000
30,000
5,000
12,000
19,000
-66,000
1,93,000
10,000
16,000
57,000
24,000
64,000
12,500
12,000
28,500
18,000
83,000
8,500
16,000
28,500
24,000
Total OHEs of prod.depts
5,95,000 3,00,000 1,35,000 1,60,000
Reciprocal Services Method
Interdepartmentalservices are given
full recognitionrather than partialrecognition as withthe step method.
Service Department(Cafeteria)
Service Department(Custodial)
Operating Department(Machining)
Operating Department(Assembly)
Because of its mathematical complexity,
the reciprocal method is rarely used.
Reciprocal Services Methods
Trial & Error Method
RepeatedDistribution
Method
Algebraic Simultaneous
Equation Method
Reciprocal Services Methods
Trial & Error Method
Cost Of one Service Dept (Say A ) is apportioned To another Service Dept (Say B) based on service rendered
The cost of another dept (B) plus its share In the cost of first service department (A) Is again apportioned to first service department
The amount so apportioned to A will again be apportioned to the service department B
The process continues till amount becomes negligible
Service Departments (Rs)
X Y
Calculation Of Total Costs Of Service Departments
Total Exp as per Primary Distribution 23,400 30,000
Charge
10% 0f Rs 23,400 (X) to Y 2,340 20% of Rs.32,340 (Y) to X 6,468 10% of Rs.6,468 (X) to Y 64720% of Rs.647 (Y) to X 129 10% of Rs.129 (X) to Y 1320% of Rs.12 (Y) to X 3(Since Rs.3 to be apportioned is very small
distribution process is stopped )
30,000 33,000Total
Secondary Overhead Distribution Summary
Particulars
Production Departments (Rs.)
Total Rs.
A B C
Total expenses as per primary overhead distribution summary
Add Service Dept. Costs :
X : Rs.30,000 at 20%, 40%
& 30% to A,B, and C
Y : Rs.33,000 at 40%, 20%
& 20% to A, B & C
80,000
6,000
13,200
70,000
12,000
6,600
50,000
9,000
6,600
2,00,000
27,000
26,400
Total 99,200 88,600 65,600 2,53,400
Reciprocal Services MethodsRepeated
DistributionMethod
1 Distribute the cost of a service Dept . to the Production and service department Using the percentage
2 Apportion the cost of 2nd service department (Aggregate) to production and other service department as per % given
3 Use the same procedure with other service departments till the cost of service departments become negligible
Question A factory is having 3 prod . Departments A,B & C, and 2 service Departments Boiler House and Pump Room. The boiler house was to depend upon the pump Room for supply of water and in turn ,depends upon the boiler house for supply of steam power for driving the pump The expenses incurred by the production department during the period are: A Rs 8,00,000,B Rs 7,00,000And C Rs 5,00,000.The expenses of Boiler house are Rs 2,34,000 and the Pump House Rs 3,00,000.The expenses of Boiler House and Pump house are Apportioned to the prod. departments on the following basis
A B C BH PRExpenses Of Boiler House 20% 40% 30% - 10%
Expenses Of Pump Room 40% 20% 20% 20% -
Particulars Total Rs
BasisProd Departments (Rs) Service Dept
(Rs)A B C Boiler Pump
P Distribution 25,34,000 given 8,00,000 7,00,000 5,00,000 2,34,000 3,00,000Add Service Dept. Costs
Boiler House 0 20:40:30:10 46,000 93,600 70,200 -2,34,000 23,400
Pump Room 0 40:20:20:20 1,29,360 64,680 6 4,680 64,680 -3,23,400
Boiler House 0 20:40:30:10 12,936 5,872 19,404 -64,680 6,468
Pump Room 0 40:20:20:20 2,587 1,294 1,294 1,293 -6,468
Boiler House 0 20::40:30:20 259 517 388 -1293 129
Pump House 0 40:20:30:20 52 26 26 25 -129
Boiler House 0 20:40:20:20 5 10 8 -25 2
Pump House 0 40:20:20:20 1 1 0 0 -2
Total 25,34,000 9,92,000 8,86,000 6,56,000 0 0
Secondary Overhead Distribution Summary
Reciprocal Services Methods
AlgebraicSimultaneous
Equation Method •Total Costs of Service Departments are
Expressed in algebraic equation
•Equations are developed on the basis of Primary distribution & % of service rendered to each other
•Total Costs of Service Departments can Be calculated by solving EQUATIONS
Algebraic Equation
X= OHE’s + % of Y
Y= OHE’s + % of X
Service Department OHE’S can be apportioned
M N P R SR 20% 30% 40% - 10%
S 30% 40% 10% 20% -
Quick Check Data
Allocation bases:Business school administration costs (ADMIN): Number of employees
Business administration computer services (BACS): Number of personal computers
The direct method of Apportionment is used.
Quick Check
How much cost will be apportioned from Administration to Accounting?
a. INR 36,000
b. INR144,000
c. INR180,000
d. INR 27,000
How much cost will be apportioned from Administration to Accounting?
a. INR 36,000
b. INR144,000
c. INR180,000
d. INR 27,000
How much cost will be apportioned from Administration to Accounting?
a. INR 36,000
b. INR144,000
c. INR180,000
d. INR 27,000
How much cost will be apportioned from Administration to Accounting?
a. INR 36,000
b. INR144,000
c. INR180,000
d. INR 27,000
Quick Check
INR180,000X20
20 + 80= INR 36,000
Quick Check
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 52,500
b. INR135,000
c. INR 270,000
d. INR 49,500
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 52,500
b. INR135,000
c. INR 270,000
d. INR 49,500
Quick Check
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 52,500
b. INR 135,000
c. INR 270,000
d. INR 49,500
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 52,500
b. INR 135,000
c. INR 270,000
d. INR 49,500
INR 90,000 ×18
18 + 102 = INR 13,500
Quick Check Data
Apportionment bases:Business school administration costs (ADMIN): Number of employees
Business administration computer services (BACS): Number of personal computers
The step method of apportionment is used.
Quick Check
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 35,250
b. INR 49,072
c. INR 18,000
d. INR 26,333
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 35,250
b. INR 49,072
c. INR 18,000
d. INR 26,333
Quick Check
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 35,250
b. INR 49,072
c. INR 18,000
d. INR 26,333
How much total cost will be apportioned from ADMIN and BACS combined to the Accounting Department?
a. INR 35,250
b. INR 49,072
c. INR 18,000
d. INR 26,333
Overhead Appropriation
Few Questions
4. SECONDARY DISTRIBUTION SUMMARY
Cost of service department
Basis of apportionment
Total Rs.
Production Department
P1 P2 P3
primary distributionCanteen
Power house (light)
Power house (power)
Stores
Time keeping & accounts
Repair shop
---No. of employee
(6:5:4)No. of light points
(3:4:5)House Power
(3:2:3)No. of requisitions
(4:3:5)No. of employee
(6:5:4)
Value of assets(2:3:4)
63,0001,500
1,200
4,000
3,600
3,000
4,500
20,000600
300
1,500
1,200
1,200
1,000
18,000500
400
1,000
900
1,000
1,500
25,000400
500
1,500
1,500
800
2,000
Allocated overhead Total 80,800 25,800 23,300 31,700
Items Basis Total(Rs.)
Production Department Service Department
P1 P2 P3 Office Workshop
Indirect wagesIndirect materialsGeneral overhead
Amenities to staff
Employer’s contribution to E.S.I. Power
Depreciation
Apportionment of workshop overheadApportionment of office overhead
ActualActual
Direct wages(4:5:6)
No.of employees(6:5:6:3:5)
Direct Wages(4:5:6)
H.P. of machineX
Machine hours worked
(6:16:15:1)15% of value of
machinery
Machine hours(2:4:3)
Direct wages(4:5:6)
25,00010,9501,500
12,500
1,200
3,800
15,750
3,0002,000
400
3,000
320
600
4,500
3,0003,000
500
2,500
400
1,600
5,250
4,0003,000
600
3,000
480
1,500
3,750
10,0001,100
-
1,500
- -
-
5,0001,850
-
2,500 -
100
2,250
70,700 13,820
2,600
3,360
16,250
5,200
4,200
16,330
3,900
5,040
12,600
-
(-) 12,600
11,700
(-) 11,700
-
Allocated overhead Total 19,780 25,650 25,270 - -
1. Overhead Analysis Sheet
2. OVERHEAD ANALYSIS SHEET
Items Basis Total (Rs.)
Production Deptt .(Rs) Service Deptt( Rs).
P1 P2 P3 S1 S2
Rent and rates
General lighting
Indirect wages
Power
Depreciation
Direct wages Indirect materials
Apportionment of Service DepartmentsOverheadS1
S2
Floor space(4:5:6:4:1)
Light points(2:3:4:2:1)
Direct wages(600:400:600:300:39)
H.P. of Machine(6:5:5:1)
Value of machines(12:16:20:1:1)
ActualActual
Direct wages(3:2:3)Given(2:3:5)
Total (A)Working hours (B)
5,000
600
1,939
1,500
10,000
1,695966
1,000
100
600
600
2,400
-300
1,250
150
400
300
3,200
-200
1,500
200
600
500
4,000
-200
1,000
100
300
100
200
1,500-
250
50
39
-
200
195266
21,700 5,000
1,200
200
5,500
800
300
7,000
1,200
500
3,200
(-) 3,200
-
1,000
-
(-) 1,000
21,700 6,4002,560
6,6003,000
8,7001,500
Nil Nil
Overhead rate per working hour [(A) ÷(B)] 2.50 2.20 5.80
COST OF PRODUCT – X
Direct materialDirect Labour Prime CostFactory Overhead :P1 : 4 x 2.50
P2 : 5 x 2.20
P3 : 3 x 5.80
Cost of Product X
10.0011.0017.40
50.0030.00
80.00
38.40
118.40
( Rs)
3. SECONDARY OVERHEAD DISTRIBUTION SUMMARY
Particulars Total Rs. Base Service Departments (Rs.) Production Departments
P Q R S X Y ZFactory overhead
Add :
Service
Dept.costs
P
Q
R
S
5,95,000
0
0
0
0
Given
No. of
Employees
(50:40:50:
100:125:85)
DLHs
Rs.80,000 in
(6:3:4:3:4)
Area
(Rs.1,33,000 in (10:30:15:
15)
DLHs (Rs.66,000 in 4:3:4)
45,000
-45,000
75,000
5,000
-80,000
1,05,000
4,000
24,000
-1,33,000
30,000
5,000
12,000
19,000
-66,000
1,93,000
10,000
16,000
57,000
24,000
64,000
12,500
12,000
28,500
18,000
83,000
8,500
16,000
28,500
24,000
Total OHEs of prod.depts
5,95,000 3,00,000 1,35,000 1,60,000
5. OVERHEAD DISTRIBUTION STATEMENT
Particulars of Expenses
Basis of Apportionment
Total Rs. Production Deptts. Service Deptts.
X Y A B
Depreciation
Rent, Rates & Taxes
Power
Ins.on assets
Canteen exp.
Electricity
Direct wages Direct material
Assets value(10:5:3:1)Floor space(5:4:1:2)H.P. of machine(10:5:4:1)Assets value(10:5:3:1)No. of workers(100:50:50:25)Light points(25:15;10:10)ActualActual
38,000
18,000
12,500
9,500
5,400
3,600
8,0004,000
20,000
7,500
6,250
5,000
2,400
1,500
------
10,000
6,000
3,125
2,500
1,200
900
------
6,000
1,500
2,500
1,500
1,200
600
5,0004,000
2,000
3,000
625
500
600
600
3000---
99,000 42,650+11,150
23,725+7,433
22,300-22,300
10,325+3,717
Re-distribution of expenses of Deptt. A among X, Y and B in ratio 3:2:1 Re-distribution of expenses of Dept. B between X and Y equally
53,800
+7,021
31,158
+7,021
Nil
---
14,042
-14,042
Allocated overhead 60,821 38,179 Nil Nil
7. STATEMENT SHOWING OVERHEAD EXPENSES OF PRODUCTION DEPARTMENTS A AND B
Particulars of Expenses
Basis of Apportionment
Total Rs. Production Deptts. Service Deptts.
A B C D
Direct materialDirect labour Depreciation
Rent,Rates & Tax
Insurance
Power Canteen exp. Electricity
ActualActualValue of Assets(10:5:3:1)Floor space(5:4:1:2)Value of Assets(10:5:3:1)H.P. of machine(10:5:4:1)No. of workers(100:50:50:25)Light points(25:15;10:10)
5,00015,00095,000
18,000
7,600
10,000
5,400
2,400
------
50,000
7,500
4,000
5,000
2,400
1,000
------
25,000
6,000
2,000
2,500
1,200
600
3,00010,00015,000
1,500
1,200
2,000
1,200
400
2,0005,0005,000
3,000
400
500
600
400
1,58,400 69,900 37,300 34,300 16,900
Re-distribution of expenses of service department ‘C’ Rs. 12,000 to D and balance of Rs. 22,300 to A:B= 3:2 Re-distribution of expenses of service Department “D” to A:B = 9:1
+13,380 +8,920 (-) 34,300 +12,000
83,280
26,010
46,220
2,890
Nil
---
28,900
(-)28,900
Allocated overhead total 1,09,290 49,110 Nil Nil
thanks
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