JPS CC collected the following statistics in order to allocate their overheads among the various departments:Cost itemsProduction AProduction BService CValue of equipmentN$ 15 000N$ 9 000N$ 6 000Number of employees362420Floor space400m^2300m^2200m^2Material usedN$ 40 000N$ 30 000N$ 5 000Direct labour hours1 300700905Machine hours450305195the following amounts represent the budgeted overheads for 2019:Depreciation on equipment900Rent of factor building2 250Electricity factory900Protective clothing800Cafeteria720Insurance building450Insurance machinery750Overhead allocation rates are based on labour hours, while the secondary apportionment of the service department takes place according to machine hours.Required:(a) Calculate the overhead analysis of each of the two production departments for 2003(b) Calculate the absorption rate for the production departments.(c) What causes under/over absorption rates.

The continuing costs involved in running a firm are referred to as overhead. Even though these costs…

Answered: (a) Calculate the overhead analysis of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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JPS CC collected the following statistics in order to allocate their overheads among the various departments:

Cost items	Production A	Production B	Service C
Value of equipment	N$ 15 000	N$ 9 000	N$ 6 000
Number of employees	36	24	20
Floor space	400m^2	300m^2	200m^2
Material used	N$ 40 000	N$ 30 000	N$ 5 000
Direct labour hours	1 300	700	905
Machine hours	450	305	195

the following amounts represent the budgeted overheads for 2019:

Depreciation on equipment	900
Rent of factor building	2 250
Electricity factory	900
Protective clothing	800
Cafeteria	720
Insurance building	450
Insurance machinery	750

Overhead allocation rates are based on labour hours, while the secondary apportionment of the service department takes place according to machine hours.

Required:

(a) Calculate the overhead analysis of each of the two production departments for 2003

(b) Calculate the absorption rate for the production departments.

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