Required: (a) Prepare an overhead cost analysis for the period concerned, showing clearly the bases of apportionment used. (b) Calculate the overhead absorption rates for each of the three production departments. (Re-apportion the maintenance costs on the basis of machine hours.) (c) Calculate the selling price of a unit of product (to the nearest $) based on the estimates below and using the absorption rates calculated in (b) above. The company requires a profit of 20% of the selling price. Material Direct Labour A Direct Labour B Direct Labour C Machine hours A Machine hours B 40 kilos@ $5 per kilo 10 hours @ $15 per hour 4 hours@ $14 per hour 12 hours @ $16 per hour 15 10
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
![Accounting
Question 3
Barns Ltd. has three production departments: A, B, and C, and two service
departments: Stores and Maintenance. The company absorbs its overhead costs
on a machine hour basis in depts. A and B, and a labour hour basis in department
C. The entity apportions indirect wages using labour hours worked in each
department. The company has budgeted its production overhead costs for the
forthcoming year as follows:
Indirect wages
Depreciation of plant
Rent
Power
Canteen costs
Plant insurance
The following information is also available:
Labour Hours
Plant value
Floor area (sq.
m)
Machine hours
Employees
Stores
requisitions
KWH ('000)
A
9,000
$130,000
40,000
Material
Direct Labour A
Direct Labour B
Direct Labour C
12,000
75
10,000
Machine hours A
Machine hours B
$
96,000
376,000
147,000
72,000
123,000
117,500
100
B
C
7,000 16,000
$70,000 $20,000
30,000
20,000
15,000
60
8,000
60
5,000
50
2,000
60
Stores Main.
4,000
4,000
$5,000 $10,000
10,000
5,000
nil
8
nil
40 kilos @ $5 per kilo
10 hours @ $15 per hour
4 hours @ $14 per hour
12 hours @ $16 per hour
15
10
10
Required:
(a) Prepare an overhead cost analysis for the period concerned, showing clearly
the bases of apportionment used.
4,000
12
2,000
(b) Calculate the overhead absorption rates for each of the three production
departments. (Re-apportion the maintenance costs on the basis of machine
hours.)
10
(c) Calculate the selling price of a unit of product (to the nearest $) based on the
estimates below and using the absorption rates calculated in (b) above. The
company requires a profit of 20% of the selling price.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc1bbd019-5c27-45fb-bb48-440de487fe08%2F856aa74a-539d-4bf8-9612-82dc1fe48500%2Fd0xzk5r_processed.jpeg&w=3840&q=75)
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