Monica Ltd is preparing its overhead budgets for a forthcoming period. The company has three production departments A, B and C, and two service departments X and Y. The following figures have been produced: Departments A B C X Y Overhead costs 400 000 420 000 450 000 400 000 420 000 Machine hours 15 000 12 000 13 000 Overhead is absorbed on a machine hour basis. Departments A B C X Y Deprtments X 20% 30% 10% 40% Departments Y 30% 30% 20% 20% Requirement: (a) Prepare a schedule of the overhead costs to be charged to departments A, B and C,using the reciprocal/repeated distribution method to apportion the service department costs to the production departments (work to the nearest NS). Stop allocation when the overheads to be allocated are below N$100. (b) Calculate the overhead absorption rates for the period for departments A, B and C (work to decimal places). (c) Other than the repeated distribution method, identify the two other methods of reapportionment that could be used for the reapportionment of service department costs across production departments
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Monica Ltd is preparing its overhead budgets for a forthcoming period. The company has three production
departments A, B and C, and two service departments X and Y. The following figures have been produced:
| Departments | A | B | C | X | Y |
| Overhead costs | 400 000 | 420 000 | 450 000 | 400 000 | 420 000 |
| Machine hours | 15 000 | 12 000 | 13 000 |
Overhead is absorbed on a machine hour basis.
| Departments | A | B | C | X | Y |
| Deprtments X | 20% | 30% | 10% | 40% | |
| Departments Y | 30% | 30% | 20% | 20% |
Requirement:
(a) Prepare a schedule of the overhead costs to be charged to departments A, B and C,using the reciprocal/repeated distribution method to apportion the service department costs to the production departments (work to the nearest NS). Stop allocation when the
(b) Calculate the overhead absorption rates for the period for departments A, B and C (work to decimal places).
(c) Other than the repeated distribution method, identify the two other methods of reapportionment that could be used for the reapportionment of service department costs across production departments
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