Overhead cos, issues. (From CIMA Management Accounting Pillar Managerial Level !
ID: 2722649 • Letter: O
Question
Overhead cos, issues. (From CIMA Management Accounting Pillar Managerial Level ! Paper, November 2006] X has two production departments. Assembly and Finishing, and two service departants, and Maintenance. Stores provides the following service to the production departments: 60% to Assembly and 40% to Finishing. Maintenance provides the following service to the production and service departments: 40% to Assembly, 45% to Finishing and 15% to Stores. The budgeted information for the year is as follows: At the end of the year after apportioning the service department overheads, the total fixed production overheads debated to the Assembly department's fixed production overhead control account were 180000. the actual output achieved was 120000 units for the AssemblyExplanation / Answer
Apportionment of overheads of service departments:
Predetermined overhead rate for Assembly Department = Budgeted Fixed Production overhead / Budgeted output in units = $ 100,000 / 100,000 = $ 1 per unit
As actual output was 120,000 units, applied fixed production overhead to Assembly department = $ 120,000
Actual fixed production overhead cost incurred for Assembly department = $ 180,000
As applied overhead is less than actual overhead incurred, under-absorption of fixed production overhead in Assembly department is $ 60,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.