Ultimate Manufacturers has three production departments (assembling, finishing and packaging) and one service department in its factory. A predetermined overhead absorption rate has been established for each of the production departments, on the basis of machine hours at normal capacity. The overheads of each production department comprise directly allocated expenses and a share of the overheads of the service department, apportioned in the ratio of 8:12:5 to departments, Assembling, Finishing and Packaging respectively. All overheads are classified as fixed in nature. The actual overhead incurred in each department was in line with the budget. The following table of incomplete information is available concerning the apportionment and absorption of production overheads for the period ending May 2021 PRODUCTION DEPARTMENTS FINISHING ASSEMBLING R3 500 000 PACKAGING R4 250 000 BUDGETED OVERHEAD PRODUCTION R6 750 000 DEPARTMENT (a) (b) R 825 000 BUDGETED SERVICE DEPARTMENT APPORTIONMENT 40 000 hrs (c) (e) (f) R 225 (d) NORMAL MACHINE HOURS CAPACITY PREDETERMINED ABSORPTION RATE ACTUAL MACHINE UTILISATION Over/(under) absorption of overheads (g) 25 000 hrs 40 000 hrs (h) R602 500 (R75 000) Required: Q.1.1 Calculate the missing figures for (a) to (h). Show all workings and round off all calculations to two decimal places.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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