Practical on Appropriation of Overheads

1. A company's expenses for the year ending 30th June 2003 are given below :

Items Production Departments Office WorkshopP1 P2 P3

Direct Wages (Rs.) 20,000 25,000 30,000 - -Direct Materials (Rs.) 30,000 35,000 45,000 - -Indirect wages (Rs.) 3,000 3,000 4,000 10,000 5,000Indirect Materials (Rs.) 2,000 3,000 3,000 1,100 1,850No. of Employees 30 25 30 15 25Value of Machinery (Rs.) 30,000 35,000 25,000 - 15,000H.P. of Machine 15 20 25 - 5Machine hours worked 10,000 20,000 15,000 - 5,000

General Expenses(1) General Overhead Rs. 1,500(2) Amenities to Staff Rs.12,500(3) Employer's contribution to E.S.I. Rs. 1,200(4) Power Rs. 3,800(5) Depreciation 15% of the value of machinery

You are required to prepare an Overhead Analysis Sheet for the departments showing clearly the basis of apportionment, where necessary.

2. Modern Manufacturing Ltd., has three production departments P1, P2, P3 and two service departments S1 and S2 the details pertaining to which are as follows :

P1 P2 P3 S1 S2

Direct Wages (Rs) 3,000 2,000 3,000 1,500 195Working hours 2,560 3,000 1,500 - -Indirect materials 300 200 200 - 266Value of machines (Rs.) 60,000 80,000 1,00,000 5,000 5,000H.P. of machines 60 30 50 10 -Light points 10 15 20 10 5Floor space (in sq.ft) 2,000 2,500 3,000 2,000 500

The following figures extracted from the accounting records are relevant :Rent and Rates Rs. 5,000 General Lighting Rs. 600Indirect wages Rs. 1,939 Power Rs. 1,500Depreciation on machines Rs.10,000

Apportion the expenses of service department S1 according to direct wages and those of service department S2 in the ratio of 2:3:5 to the production departments.

Find out the total cost of product X which is processed for manufacture in departments P1 P2 and P3 for 4, 5 and 3 hours respectively, given that its direct material cost is Rs.50 and direct labour cost is Rs.30.

3. The Dolphin India Ltd., is divided into four departments. A, B and C are production departments and D is a service department. The actual costs for October 2003 are as follows :

Rs.Rent 1,000Repairs to plant 600Depreciation on plant 450Light 100Supervision 1,500Fire insurance (stock) 500Power 900Employer's State Insurance Contribution 150

The following information is available in respect of the four departments :

A B C DArea (sq.ft) 1,500 1,100 900 500No. of employees 20 15 10 5Direct wages (Rs.) 6,000 4,000 3,000 2,000Value of plant (Rs.) 24,000 18,000 12,000 6,000Value of stock (Rs.) 15,000 9,000 6,000 -

Apportion the cost to various departments by preparing overhead distribution summary chart.

4. The following are the particulars relating to the production departments P1

P2 and P3 and the service departments - Canteen, Powerhouse, Store, Time Keeping, Accounts and Repair shop.

Production departments Cost after primary distribution (Rs.)P1 20,000P2 18,000P3 25,000

___________________63,000

___________________

Service department cost Rs.Canteen 1,500Power house (lighting) 1,200Power house (Power) 4,000Stores 3,600Time keeping and accounts 3,000Repair shop 4,500

____________ 17,800 ____________

Other information availableP1 P2 P3

________________________________________________________________

No. of employees 30 25 20No. of light points 6 8 10Horse power of machines 300 200 300No. of requisitions 4,000 3,000 5,000Value of assets (Rs.) 1,00,000 1,50,000 2,00,000

Show the secondary distribution on direct redistribution method.

5. In a certain factory, there are two Production departments X and Y, two Service Departments A & B. Total expenses of the service department A are apportioned between X, Y and B in the ratio 3 : 2 : 1 and the expenses of the service department B are allocated between X and Y equally. From the following particulars calculate the overheads to be allocated to Production Department X and Y.

X Y A BFloor space (sq.ft.) 5,000 4,000 1,000 2,000Assets (Rs. in lakhs) 10 55 3 1H.P. of machine 100 50 40 10No. of workers 100 50 50 25Light points 25 15 10 10Direct wages (Rs.) 10,000 8,000 5,000 3,000Direct material (Rs.) 15,000 10,000 4,000

-

Total expenses and charges are : Rs.Depreciation 38,000Rent, Rates and Taxes 18,000Power 12,500Insurance on assets 9,500Canteen expenses 5,400Electricity 3,600

6. Bharat Engineering Works has three production departments A, B, C and one service department S. From the under mentioned particulars calculate labour hour rate for each of production departments. Expenses for the period of 12 months.

Rs. Rs.Rent 36,000 Power 8,250Indirect wages 5,200 Depreciation on machinery 22,000Electricity 5,600 Canteen expenses 6,500

Additional information :A B C S

Light points (Nos.) 7 7 9 5Floor space (sq.mtr) 300 250 450 200H.P. of machine (H.P) 65 30 30 40No. of workers (Nos) 2 3 6

2Direct wages (Rs.) 12,000 14,000 18,000 8,000Cost of machine (Rs.) 50,000 60,000 80,000 10,000

Working days : 200 days of 8 hrs. eachService rendered by service department S to production departments A, B & C is 30%, 20%, 50% respectively.

7. In a manufacturing concern there are four departments viz. A, B, C and D. A & B are production departments. "C" renders service worth Rs.12,000 to D and balance to A & B in the ratio of 3:2. D renders service to A & B in the ratio of 9:1.

The overhead expenses incurred in a year are as follows :Rs. Rs.

Depreciation 95,000 Rent, rates & taxes 18,000Insurance 7,600 Power 10,000Canteen expenses 5,400 Electricity 2,400

Following further information are given regarding the Departments

A B C DRs. Rs. Rs. Rs.

Direct material 6,000 5,000 3,000 2,000Direct labour 20,000 10,000 10,000 5,000Floor space occupied (sq.ft) 5,000 4,000 1,000 2,000Value of assets (in lakh) 10 5 3 1H.P. of machine 1,000 500 400 100No. of workers 100 50 50 25Light and fan points 50 30 20 20

From the above particulars prepare a statement showing overhead expenses of production departments A and B after redistribution of service departments expenses.