Green Co. has three production departments Fern, Forest, and Moss and one service department Shade. Green Co. is preparing its annual budget for the final quarter of 2021. Planned overhead costs for the quarter are as follows: Overheads Allocated overheads 40,500 Supervision Plant Depreciation 14,400 20,000 6,000 Machine Insurance Rates and Rent 46,000 The following information is available for each department: Departmental details Fern Forest Moss Shade Allocated overhead 11,000 16,500 9,500 3,500 Machine Value (£) Budgeted Direct Labour hours Floor Area Occupied (Sq.metres) Number of employees Plant at cost (£000) 5,000 2,500 3,500 1,500 1,200 600 1,800 3,000 800 1000 200 700 400 40 80 1,845 852 61 142 Of the total overhead costs allocated to the service department Shade, 20% is charged to Forest and the remainder is charged equally to the other two production department. a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly. b) Allocate the services department Shade's costs to all production departments. c) costs can have on decisions that the management of a company must make regarding the pricing of their products. Critically discuss the issues that fixed, variable and semi-variable Note: You must use the relevant academic literature and relevant practical examples or case studies to answer this question and include references appropriately as an evidence of your wider reading and research.
Green Co. has three production departments Fern, Forest, and Moss and one service department Shade. Green Co. is preparing its annual budget for the final quarter of 2021. Planned overhead costs for the quarter are as follows: Overheads Allocated overheads 40,500 Supervision Plant Depreciation 14,400 20,000 6,000 Machine Insurance Rates and Rent 46,000 The following information is available for each department: Departmental details Fern Forest Moss Shade Allocated overhead 11,000 16,500 9,500 3,500 Machine Value (£) Budgeted Direct Labour hours Floor Area Occupied (Sq.metres) Number of employees Plant at cost (£000) 5,000 2,500 3,500 1,500 1,200 600 1,800 3,000 800 1000 200 700 400 40 80 1,845 852 61 142 Of the total overhead costs allocated to the service department Shade, 20% is charged to Forest and the remainder is charged equally to the other two production department. a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly. b) Allocate the services department Shade's costs to all production departments. c) costs can have on decisions that the management of a company must make regarding the pricing of their products. Critically discuss the issues that fixed, variable and semi-variable Note: You must use the relevant academic literature and relevant practical examples or case studies to answer this question and include references appropriately as an evidence of your wider reading and research.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 1
Green Co. has three production departments Fern, Forest, and Moss and one service
department Shade. Green Co. is preparing its annual budget for the final quarter of
2021. Planned overhead costs for the quarter are as follows:
Overheads
Allocated overheads
40,500
Supervision
Plant Depreciation
14,400
20,000
6,000
46,000
Machine Insurance
Rates and Rent
The following information is available for each department:
Departmental details
Fern
Forest
Moss
Shade
Allocated overhead
11,000
16,500
2,500
9,500
3,500
3,500
1,500
Machine Value (£)
Budgeted Direct Labour hours
Floor Area Occupied (Sq.metres)
Number of employees
Plant at cost (£000)
5,000
1,200
600
1,800
1000
3,000
800
200
700
400
40
80
1,845
852
61
142
Of the total overhead costs allocated to the service department Shade, 20% is
charged to Forest and the remainder is charged equally to the other two
production department.
a)
Prepare an overhead analysis sheet showing the total overhead cost
budgeted for all four departments. You must show all your workings
clearly.
b)
Allocate the services department Shade's costs to all production
departments.
c)
Critically discuss the issues that fixed, variable and semi-variable
costs can have on decisions that the management of a company must
make regarding the pricing of their products.
Note: You must use the relevant academic literature and relevant practical
examples or case studies to answer this question and include references
appropriately as an evidence of your wider reading and research.
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