TUTORIAL: OVERHEADS

QUESTION 1

Running Women Boutique forecast the following production overhead for its production and
service cost centers for the year ended June 2018.

RM
Allocated cost: Sewing 200,000
Cutting 139,000
Packaging 78,000
Maintenance 75,000
Store 48,000

Common costs: Depreciation on machines 56,000

Rental 29,000
Utilities expenses 55,000

The following information relates to the above cost centres:

Cost centres
Sewing Cutting Packaging Maintenance Store
Area ( sq ft) 1000 800 400 400 300
Maintenance 24,000 18,000 6,000 - -
service hours
Number of 200 160 110
material
requisitions
Machine hours 12,000 10,000 9,000 - -
Labour hours 8,000 14,000 10,000 - -
Labour cost (RM) 32,000 84,000 50,000 - -
Cost of Machine 100,000 180,000 280,000 - -
(RM)

Required:

a. Prepare the overheads analysis statement and calculate predetermined Overhead

Absorption Rate (OAR) for each department based on the following basis:

Sewing : Machine hours

Cutting : Direct labour hours

Packaging : % of direct labour costs

(ALL answers must be rounded off to the nearest RM)

(20 marks)
b. At the end of the year, the actual information was extracted as follows:

Cost centers
Sewing Cutting Packaging
Machine hours 14,000 10,000 8,800
Direct labor hours 7000 8,000 9,000
Direct labour cost (RM) 28,000 48,000 45,000
Actual overhead (RM) 352,000 138,000 122,000

Required:

Calculate the Under or Over absorption of overhead for each department.

(4 marks)

c. List ONE (1) type of production cost.

(1 mark)

(Total: 25 marks)
QUESTION 2

Palembang Berhad was an established company that manufactures a highly demanded product
called Super Max. The production started in the Moulding Department and completed in the
Finishing Department. It also operates two service departments, Store and Canteen departments.
Shown below are the next year’s budgeted production data for the company:

Common costs: RM

Rent expenses 25,500

Depreciation on motor vehicles 38,900
Insurance on building 43,750

Other additional information:

Total Moulding Finishing Store Canteen

(RM) (RM) (RM) (RM) (RM)
Allocated overheads 100,000 50,500 42,100 3,400 4,000

Floor Area 50,300 14,600 15,850 12,780 7,070

Value of motor vehicles (RM) 434,000 120,000 134,000 95,000 85,000
Number of employees 75 45 30 - -
Number of requisitions 3,000 1,000 2,000 - -
Machine hours 20,500 12,300 8,200 - -
Direct labour hours 14,300 6,700 7,600 - -

Required:

a. Prepare the overheads analysis statement and calculate predetermined Overhead

Absorption Rate (OAR) for each department based on the following basis:

Moulding Department: Machine hours

Finishing Department: Direct labour hours

(ALL answers must be rounded off to the nearest RM)

(20 marks)
b. At the end of the year, the actual information was extracted as follows:

Moulding Finishing
Production overhead incurred RM168,600 RM106,000
Machine hours 18,200 10,500
Direct labour hours 8,550 9,750

Required:

Calculate the Under or Over absorption of overhead for each department.

(4 marks)

c. List ONE (1) type of non-production cost.

(1 mark)

(Total: 25 marks)
QUESTION 3

Sasha Sdn Bhd is a manufacturing company that produces central processing unit (CPU) for
computers, tablets, hand phones and other electronic devices. The production of CPU is carried
out by the Moulding and Assembly departments. Besides that there are two service departments
that provide support services to the production departments. The budgeted overhead costs for
the company for the year 2018 are as follows:

Common costs: RM

Insurance on Machinery 150,000

Factory Rental 420,000
Supervisor’s salaries 125,000

Other additional information:

Moulding Assembly Store Canteen

(RM) (RM) (RM) (RM)
Other allocated overhead 10,200 4,200 8,150 2,800
Floor Area 12,500 10,500 5,500 1,500
Value of machine (RM) 750,000 288,000 50,500 82,000
Number of employees 95 55 15 25
Store’s reapportionment ratio 4 2
Maintenance reapportionment ratio 2 3
Direct labour hours 18,200 28,800
Machine hour 55,000 42,000

Required:

a. Prepare the overheads analysis sheet and calculate predetermine Overhead Absorption
Rate (OAR) for each department based on the following basis:

Moulding Department: Machine hours

Assembly Department: Direct labour hours

(ALL answers must be rounded off to the nearest RM)

(20 marks)
 b. At the end of the year, the actual information was extracted as follows:

Moulding Assembly
Production overhead incurred RM18,210 RM23,003
Machine hours 5,000 3,000
Direct labour hours 4,200 2,200

Required:

Calculate the Under or Over absorption of overhead for each department.

(4 marks)

c. List ONE (1) type of non-production cost.

(1 mark)

(Total: 25 marks)
QUESTION 4

Al Ayubi Bhs which produces high technology machine parts has five departments: Mixing,
Grinding, Packaging, Store and Maintenance.

Mixing and Griding departments are machine oriented; while Packaging department is labour
oriented. The following budgeted expenses relate to the departments for fourth quarter of 2018 is
as follows:

Other additional information:

Total Mixing Grinding Packaging Store Maintenance

(RM) (RM) (RM) (RM) (RM) (RM)

Direct 120,000 30,000 35,000 55,000

Materials
Direct Labour 100,000 20,000 30,000 50,000
Direct 8,545 8,545
Expenses
Indirect 58,000 15,000 18,000 12,000 5,000 8,000
Labour
Supervision 15,000
Rent and 24,000
rates
Electricity 1,200
Power 3,600
Insurance on 13,200
Machine
Depreciation 45,475
on machine

Additional information:

Total Mixing Grinding Packaging Store Maintenance

Direct labour 14,800 3,800 3,500 4,500

hours
Machine hours 17,000 6,500 7,500 3,000
Maintenance 100 40 40 20
hours (%)
No of 100 20 25 40 5 10
employees
Floor area (sq 9,500 2,000 2,000 2,500 2,500 500
meter)
Horse power of 8,500 3,500 2,500 1,250 250 1,000
machine
Machine value 441,500 255,000 99,000 67,500 20,000
(RM)
No of store 100 45 30 25
requisitions
Required:

a. Prepare the overheads analysis sheet and calculate predetermine Overhead Absorption
Rate (OAR) for each department.

(ALL answers must be rounded off to the nearest RM)

(20 marks)

b. At the end of the year, the actual information was extracted as follows:

Mixing Grinding Packaging

Direct labour hours 4,500 3,000 4,000
Machine hours 5,000 6,500 1,500
Total Production overhead RM56,250 RM42,100 RM36,750

Required:

Calculate the Under or Over absorption of overhead for each department.

(4 marks)

c. List ONE (1) type of production cost.

(1 mark)

(Total: 25 marks)