Select the choice which best completes the statement, or answers the question, by clicking on the corresponding letter.
The management accountant of Unsworth Brighton Limited is considering the most appropriate basis for apportioning the overhead of factory building maintenance between the company’s three principal production areas. His assistant has presented him with the following list of possible apportionment bases. Which is the most appropriate basis for apportioning this particular overhead?
Machinery repair call outs
Number of employees
Factory floor area
Factory machinery carrying amount
Usman Hastings & Co Limited manufactures wooden packing crates. Production goes through two departments: cutting and assembly. Machinery related costs of £6850 (maintenance, oil and so on) are to be apportioned between the two departments on the basis of carrying amount machinery.
All the cutting department machinery was purchased exactly two years ago at a cost of £125 200; it is being depreciated at 20% per year on the reducing balance basis. The assembly department machinery cost £45 000 exactly one year ago; it is being depreciated at 15% per year on the reducing balance basis.
What is the apportionment of the machinery related costs of £6850 between the two departments (to the nearest £)?
Cutting - £5039; Assembly - £1811
Cutting - £4539; Assembly - £2311
Cutting - £4637; Assembly - £2213
Cutting - £4957; Assembly - £1893
Overhead absorption is a way of:
classifying costs as direct or indirect
allocating an appropriate portion of overhead costs to cost units
transferring an appropriate portion of overhead costs to cost centres
classifying overhead costs between production and other overheads
Velma Valhalla Limited produces a single product. The company’s management accountant has budgeted the following totals in respect of the coming year’s production:
Direct labour.........................£1 350 770 Direct materials.....................£950 250 Production overheads............£1 850 795 Machine hours......................860 000 Units of production................430 000
An estimated overhead absorption rate for Velma Valhalla based on units of production is (to nearest penny):
£4.30
£9.66
£0.10
£0.23
Velma Valhalla Limited produces a single product. The company’s management accountant has budgeted the following totals in respect of the coming year’s production:
Direct labour.........................£1 350 770 Direct materials.....................£950 250 Production overheads............£1 850 795 Machine hours......................860 000 Units of production................430 000
An estimated overhead absorption rate for Velma Valhalla based on percentage of direct labour cost is (to one decimal place):