Hector's budgeted overheads for the next six months are as follows.

Rent and business Rates £ 500,000

Fixture Depreciation £ 700,000
Electricity, Gas and Water £ 175,000
Supervisor Salaries £ 750,000
Canteen Cost £ 60,000

These overhead are to be allocated and apportioned to the four departements using the information below.

Basis of Apportionment Service 1 Service 2 Canteen

Floor Area (m3) 3,000 4,000 1,500
Fixtures cost (£'000) 120 80 50
Number of Employees 40 30 5

Allocate and apportion the overhead to the four departements:

Cost Item Basis of Apportionment Service 1 Service 2

Rent and business Rates Floor Area 150,000 200,000

Fixture Depreciation Fixtures Cost 240,000 160,000
Electricity, Gas and Water Floor Area 52,500 70,000
Supervisor Salaries Number of Employee 300,000 225,000
Canteen Cost Number of Employee 24,000 18,000
Canteen Takings Allocation

766,500 673,000

Cost Item Service 1 Service 2 Canteen

Total Apportioned Overhead (£) 740,000 650,000 280,000

Floor Area (m2) 3,000 4,000 1,500
Fixtures cost (£'000) 120 80 50
Number of Employees 40 30 5

Cost Item Basis of Apportionment Service 1 Service 2

Total Overhead 740,000 650,000

First reapportionment Number of Employees 266,667 200,000
Revised Total Overheads (enter
figures in all 4 boxes) 1,006,667 850,000
Second Reapportionment Number of Employees 179,048 134,286
Revised Total Overheads (enter
figures in all 4 boxes) 1,185,714 984,286

In the first six months of the following year Service 2 had budgeted overhead of £980.000 and budgeted labor co
£2.940.000. Service 1 had budgeted and actual overhead of £1.200.000 and budgeted labour hours of 5.000, alth
labour hours were 5.344

Calculate the budgeted overhead absorption rate as a percentage of labor cost in service 2:
Budgeted absorption rate
Budgeted Overhead 980,000
Budgeted Direct Labour Cost 2,940,000
33%

Calculate the under or over absorption of overhead in service 1:

Budgeted Overhead £ 1,200,000
Budgeted Direct Labour Hours 5,000
£ 240

Overhead Incurred £ 1,200,000

Overhead Absorbed (240 x 5344) £ 1,282,560
Over Absorbed Overhead £ 82,560
ts using the information below.

Administration Total
1,500 10,000
100 350
25 100

Canteen Administration

75,000 75,000
100,000 200,000
26,250 26,250
37,500 187,500
3,000 15,000
-10,000

231,750 503,750

Administration Total

500,000 2,170,000
1,500 10,000
100 350
25 100

Canteen Administration

280,000 500,000
33,333 -500,000

313,333 0
 -313,333

0 0

f £980.000 and budgeted labor cost of

dgeted labour hours of 5.000, although actual

st in service 2:
Oakbeam has two production departments (cabinet and worktops) that are supported by two non-production d

Rent and rates 60,000

Machinery depreciation 60,000
Building utility cost 90,000
Managers salaries 120,000
Warehousing departement cost 175,000
Administration departement cost 50,000

These overhead are to be allocated and apportioned to the four departments as fairly as possible and the infor

Basis of Apportionment Cabinets Worktops Warehousing

Direct Labour cost (£'000) 65 35 50
Machinery Cost (£'000) 400 300 300
Floor Area (m3) 2,200 1,800 10,000

Allocate and apportion the overhead to the four departements:

Cost Item Basis of

Apportionment Cabinets Worktops
Rent and Rates Floor area 8,800 7,200
Machinery depreciation Machinery cost 24,000 18,000
Building Utility Costs Floor area 13,200 10,800
Manager Salaries Direct labour cost 31,200 16,800
Warehousing Department Costs Floor area 25,667 21,000
Administration Department Costs Direct labour cost 13,000 7,000

115,867 80,800

Oakbeam's accountant has already completed an initial allocation and apportionment of budgeted overhead bet
departements. As a second stage she now wishes to reapportion the warehousing and administration departeme
the two other departements. She has provided the following information:

Cabinets Worktops Warehousing

Total Overhead 170,000 70,000 300,000
Direct Labour cost (£'000) 70 30 50
Machinery cost (£'000) 400 300 300
Floor area (m²) 2,200 1,800 10,000

Administration Costs are to be reapportioned first based on the direct labour cost in each department. Warehous
then be apportioned between the other two departments based on machinery cost.
 Basis of
Apportionment Cabinets Worktops
Total Overhead £ 170,000 70,000
Administration Reapportionment Direct Labour Cost 37,333 16,000
Revised Total Overheads (enter figures in
all 4 boxes) 207,333 86,000
Warehousing Reapportionment Machinery Cost 186,667 140,000
Revised Total Overheads (enter figures in
all 4 boxes) 394,000 226,000

In the next year the cabinets departments had budgeted overhead of £400.000 and budgeted labour cost of £75
worktops departments the budgeted overhead absorption rate was £5 per £ of labour cost based on a budgeted
£35.000. although the actual labour cost turned out to be £33.365

Calculate the budgeted overhead absorption rate as a percentage of labor cost in Cabinet:
Budgeted absorption rate
Budgeted Overhead 400,000
Budgeted Direct Labour Cost 75,000
533%

Calculate the under or over absorption of overhead in Worktops :

Budgeted Labour Cost £ 35,000
Budgeted Overhead Absorption Rate £ 5
Overhead Incurred £ 175,000

Actual Labour Cost £ 33,365

Budgeted Overhead Absorption Rate £ 5
Overhead Absorbed £ 166,825

Overhead Incurred £ 175,000

Overhead Absorbed £ 166,825
Under Absorbed Overhead £ 8,175
rted by two non-production departemens (warehousing and administration).

fairly as possible and the information below is available to help with this.

Administration Total
100 250
0 1,000
1,000 15,000

Warehousing Administration
40,000 4,000
18,000 0
60,000 6,000
24,000 48,000
116,667 11,667
10,000 20,000

268,667 89,667

ent of budgeted overhead between its four

and administration departement overheads to

Administration Total
80,000 620,000
100 250
0 1,000
1,000 15,000

n each department. Warehousing costs should

st.
 Warehousing Administration
300,000 80,000
26,667 -80,000

326,667
-326,667

0 0

d budgeted labour cost of £75.000. for the

our cost based on a budgeted labour cost of
Jitinder started business on 1 january manufacturing the gromett. The budget includes the following for Producti

Cost Cost / Gromett

Variable materials: 4 kg @£15/kg 60
Variable labour: 2,5 hours @ £16/hours. 40
Variable production overheads £10/unit 10

Cost / Gromett

The budgeted production and sales for the first year is 4.800 grometts
Selling for budgeted price £300 each.
budgeted fixed production overheads are £192.000 per annum =
Budgeted overhead absorption rate =
Inventory Value per Unit = Absorption costing = 110 + 40 = 150 per un
= Marginal costing = 110 per unit

Selling, administration, and distribution cost are partly fixed and partly variable as follows:
fixed £ 27.000 per quarter = 108.000 / annum = 9.000 / month
Variable £7 per unit

Inventory at January was 55 Gromets.

In February Jitinder sold 440 grometts and manufactured 420.
Budgeted fixed costs are incurred evenly over the year. Actual costs and the selling price were as budget except f
fixed selling, administration, and distribution are 12% higher than budgeted. Fixed production overheads are £16

Actual fixed producktion cost = 16.374

Absorbed fixed production cost = 420 x 40 = 16.800
Over Absorption = 426
Ending Inventory ; February = 55 + 420 - 440 = 35

Calculate the profit or loss for February using both absorption costing and marginal costing

Absorption
Sales (440 x 300)
Variable production cost (110 x 420) (46,200)
Fixed production cost absorbed (40 x 420) (16,800)
Opening inventory (55 Gromets) (55 x 150) (55 x 110) 8,250
Closing inventory (35 Gromets) (35 x 150) (35 x 110) (5,250)
production cost of sales
Under/over absorption
Variable selling, administration and distribution (440 x 7)
Fixed selling, administration and distribution (112% x 9000)
Fixed production cost
Profit/loss
udget includes the following for Production costs per Grommett :

Manufactured Total Cost

420 25,200
420 16,800
420 4,200
46,200
Cost / Gromett 110

16000 /months
192.000 /4.800 = 40
orption costing = 110 + 40 = 150 per unit
ginal costing = 110 per unit

riable as follows:

he selling price were as budget except fot the

ed. Fixed production overheads are £16.374.

x 40 = 16.800

420 - 440 = 35

ginal costing

Absorption Marginal
132,000 132,000
(46,200)

6,050
(3,850)
(60,000) (44,000)
(426) -
(3,080) (3,080)
(10,080) (10,080)
(16,374)
58,414 58,466
Hector PLC
Hector PLC provides a number of different services from two service department
(service 1 and 2) that are supported by two other departments (canteen and
administration). Hector's budgeted overheads for the next six months (Januari to
June) are as follows.

Rent and business Rates £ 500,000

Fixture Depreciation £ 700,000
Electricity, Gas and Water £ 175,000
Supervisor Salaries £ 750,000
Canteen Cost £ 60,000

Canteen takings for the next six month