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Required: 1) Assign all manufacturing overheads to production and service costs. 2) Reallocate the costs assigned to service cost to production costs on the basis 3:2. 3) Compute separate overhead rates for each production cost.

Required: 1) Assign all manufacturing overheads to production and service costs. 2) Reallocate the costs assigned to service cost to production costs on the basis 3:2. 3) Compute separate overhead rates for each production cost.

FINANCIAL ACCOUNTING
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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Question 1. The production process of Quality Builders Limited is classified into two production departments, Assembly and Finishing. Moreover, there is one service department, namely, Maintenance. The Maintenance department does not have supervisors. The relevant information for the year 2019 is as follows: Indirect costs for all three departments in total: Item Depreciation & insurance of machinery Production supervisor's salary Canteen costs The following information is available about each department: Item Assembly Indirect Material 900,000 Indirect Labour 350,000 Book value of machinery 2,000,000 Number of employees Machine hours Labour hours 50 1,500 2,500 Total Finishing 450,000 150,000 500,000 30 1,000 2,179 Total (£) 750,000 200,000 120,000 1,070,000 Maintenance Required: 1) Assign all manufacturing overheads to production and service costs. 2) Reallocate the costs assigned to service cost to production costs on the basis 3:2. 3) Compute separate overhead rates for each production cost. 20
Transcribed Image Text:Question 1. The production process of Quality Builders Limited is classified into two production departments, Assembly and Finishing. Moreover, there is one service department, namely, Maintenance. The Maintenance department does not have supervisors. The relevant information for the year 2019 is as follows: Indirect costs for all three departments in total: Item Depreciation & insurance of machinery Production supervisor's salary Canteen costs The following information is available about each department: Item Assembly Indirect Material 900,000 Indirect Labour 350,000 Book value of machinery 2,000,000 Number of employees Machine hours Labour hours 50 1,500 2,500 Total Finishing 450,000 150,000 500,000 30 1,000 2,179 Total (£) 750,000 200,000 120,000 1,070,000 Maintenance Required: 1) Assign all manufacturing overheads to production and service costs. 2) Reallocate the costs assigned to service cost to production costs on the basis 3:2. 3) Compute separate overhead rates for each production cost. 20
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