Allocation And Apportionment Of Overheads Solutionss

Allocation and Apportionment of Overheads / Job and Batch costing solution
Question 1
(a) Overhead Analysis Sheet
Overheads
Basis of apportionment
Total
Machining
Assembly
Stores
Canteen
Indirect Wages
Number of indirect employees
232000
( X 232000)
( X 232000)
( X 232000)
( X 232000)

61867
123733
30933
15467
Machinery Maintenance
Budgeted machine hours

( X 94000)
( X 94000)

94000
87935
6065

Machinery Insurance
Value of machinery

( X 9050)
( X 9050)

9020
6380
2640

Rent and rates
Floor area (sq metres)

( X 49600)
( X 49600)
( X 49600)
( X 49600)

49600
19840
22320
4960
2480
Buildings Insurance
Floor area (sq metres)

( X 12800)
( X 12800)
( X 12800)
( X 12800)

12800
5120
5760
1280
640

( X 26600)
( X 26600)

Machinery depreciation
Value of machinery
26600
18815
7785

Total Allocated and Apportioned Overheads

424020
199957
168303
37173
18587
First RE-Apportionment

Canteen
Given %

( X 18587)
( X 18587)
( X 18587)

5576
10223
2788
(18587)

424020
205533
178526
39961
-
Second RE-Apportionment

Stores
Number of orders from stores

( X 39961)
( X 39961)

33126
6835
(39961)

Total Overheads

424020
238659
185361
-
-

(b) Overheads absorption rate (OAR)
OAR Machining = Budgeted overheads / Budgeted Machine hours = 238 659 / 46 400 = $5.14 per machine hour

OAR Assembly = Budgeted overheads / Budgeted Labour hours = 185 361 / 28 600 = $6.48 per labour hour

(c) Over / Under Absorption of overheads

Machining
Assembly

(5.14 X 49 120)
(6.48 X 28 150)
Overhead absorbed (OAR X Actual basis)
252 477
182 412
Less Actual Overheads
(239 110)
(192 860)
Over / (Under) Absorption
13 367
(10 448)

Over absorption
Under absorption

(d) Over absorption Machining
The over absorption of overheads occurred in the machining department because the machining department has worked more machine hours of 49 120 than the budgeted 46 400. The department has actually worked more 2 720 machine hours