Management Accounting Factory overhead Apportionment of Cost.
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Transcript of Management Accounting Factory overhead Apportionment of Cost.
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ManagementAccounting
Factory overhead Apportionment of Cost
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Cost Allocation Cost that can be identified with a specific cost center.
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Apportionment
Cost that can not be identified with a specific cost centre but must be shared out between two or more center.
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Apportionment & Allocation
Non Reciprocal Reciprocal
Repeated allocation method Algebraic method
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ExerciseFollowing data are extracted form the estimates prepared by Plastic Pots & Furniture for the accounting year: -
Electricity Afs. 54,000Bonus Pay 21,000Factory Rent 240,000Power 747,000Depreciation 195,000
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ExerciseCosts of service departments are prorated only to production departments: -
Canteen Cost Apportion on No. of employees ratio. Machine Maintenance in the ratio of 1:2:1.
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Cost centers
Cost centers are area of a business of which cost can be identified.
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ExerciseFollowing further data are also available:
Production Department Service DepartmentMoldin
gMachinin
gFinishin
gCantee
nMaintenanc
eMaterials (Afs.) 300,000 130,000 45,000 40,000 75,000Wages (Afs.) 400,000 750,000 755,000 95,000 100,000Cost of Assets (Afs.) 125,000 250,000 130,000 70,000 75,000
Horse Power Hour 700 1,400 600 88 200
Area in Sq. Yard 180 180 240 60 60Metered Units 6,000 6,000 7,000 2,000 3,000No. of Employees 240 300 380 30 80
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SolutionPlastic Pots & Furniture
Work SheetApportionment of Factory Overhead Product Deptt.
Cost HeadsProduction Department Service Department
TotalMolding Machining
Finishing
Canteen
Machine Maintenanc
eAllocated Cost (Identified)Materials 40,000 75,000 115,000
Labor Wages 95,000 100,000 195,000135,00
0 175,000 310,000
Electricity 13,500 13,500 15,750 4,500 6,750 54,000
Bonus Pay 4,000 7,500 7,550 950 1,000 21,000
Factory Rent 60,000 60,000 80,000 20,000 20,000 240,000
Power 175,000 350,000 150,000 22,000 50,000 747,000
Depreciation 37,500 75,000 39,000 21,000 22,500 195,000
c/f 203,450 275,250 156,700
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solution
b/f 203,450 275,250 156,700
No. of Employees 48,828 61,035 77,311 (203,450) 16,275
291,526
Division (1:2:1) 72,882 145,763 72,881 (291,526)
Total 411,710 712,798 442,792
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Apportionment Electricity Basis Metered units
Canteen Machine
Maintenance
Molding Machining Finishing
2,000 3,000 6,000 6,000 7,000
Total 24,000
2 3 6 6 7 242/24 3/24 6/24 6/24 7/24
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Apportionment Electricity
Molding 54,000/24*6
13,500
Machining 54,000/24*6
13,500
Finishing 54,000/24*7
15,750
Canteen 54,000/24*2
4,500
Machine maintenance
54,000/24*3
6,750
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Apportionment Bonus Pay Basis Labor wages
Molding Machining Finishing Canteen Machine Maintenance
400,000 750,000 755,000 95,000 100,000
Total
2,100,000
400 750 755 95 100 2100400/210
0750/2100 755/210
095/2100 100/210
0
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Apportionment Bonus Pay
Molding 21,000/2100*400 4,000Machining 21,000/2100*750 7,500Finishing 21,000/2100*755 7,550Canteen 21,000/2100*95 950Machine maintenance
21,000/2100*100 1,000
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Apportionment Rent Basis Area Occupied
Molding Machining Finishing Canteen Machine Maintenance
180 180 240 60 60
Total
720180/720 180/720 240/720 60/720 60/720
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Apportionment Rent
Molding 240,000/720*180 60,000Machining 240,000/720*180 60,000Finishing 240,000/720*240 80,000Canteen 240,000/720*60 20,000Machine maintenance
240,000/720*60 20,000
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Apportionment Power Basis Horse Power
Molding Machining Finishing Canteen Machine Maintenance
700 1,400 600 200 88
Total
2,988700/2,98
81400/298
8600/298
8200/2988 88/2988
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Apportionment Power
Molding 747,000/2988*700 175,000Machining 747,000/2988*1400 350,000Finishing 747,000/2988*600 150,000Canteen 747,000/2988*200 22,000Machine maintenance
747,000/2988*88 50,000
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Apportionment Deprecation Basis Power
Molding Machining Finishing Canteen Machine Maintenance
125,000 250,000 130,000 70,000 75,000
Total 650,000
125/650 250/650 130/650 70/650 75/650
125 250 130 70 75 650
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Apportionment Deprecation
Molding 195,000/650*125 37,500Machining 195,000/650*250 75,000Finishing 195,000/650*130 39,000Canteen 195,000/650*70 21,000Machine maintenance
195,000/650*75 22,500
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Reciprocal Appropriation (Repeated Appropriation Method
Machining
Finishing Maintenance
Air-conditioning
100,000 70,000 40,000 30,000
Allocated indirect cost 240,000
Machining
Finishing Air-conditioning
Maintenance Appropriation
60% 15% 25%Air Conditioning
70% 25% 5%
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Machining Finishing Maintenance
Air-conditioning
100,000 70,000 40,000 30,000
Production Service Allocate
Indirect cost(240,000)
24,000 6,000 (40,000) 10,000 28,000 10,000 2,000 (40,000) 1,200 300 (2000) 500 350 125 25 (500) 15 3.50 (25) 6.50 5 1.50 0.50 (6.50)153,570 86,430
MaintenanceAir conditioning
MaintenanceAir conditioning
MaintenanceAir conditioning
Solution