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The overhead budget for the month together with data relating to cost centres is as follows: Rs Supervision 7,525 Indirect workers 6,000 Holiday pay and National Insurance 6,200 Tooling cost 9,400 Machine maintenance labour cost 4,500 Power 1,944 Small tools and supplies 1,171 Insurance of machinery 185 Insurance of building 150 Rent and rates 2,500 Depreciation of machinery 9,250 ________ 48,825__ Fundamentals of Cost and Management Accounting (Study Text) 137 | P a g e Machine group Q R S T Total Floor Space (sq meter) 1,800 1,500 800 900 5,000 Kilowatt hours 270,000 66,000 85,000 65,000 486,000 Capital cost of machines (Rs.) 30,000 30,000 8,000 16,000 74,000 Indirect workers (persons) 3 3 1 1 8 Total workers (persons) 19 24 12 7 62 Machine maintenance hours 3,000 2,000 3,000 1,000 9,000 Tooling costs (Rs) 3,500 4,300 1,000 600 9,400 Supervision costs (Rs) 2,050 2,200 1,775 1,500 7,525 Small tools and supplies (Rs) 491 441 66 173 1,171 Machine running hours 30,000 36,000 19,000 8,000 93,000 Allocate and apportion each of the costs given to the four groups of machines on a suitable basis and then calculate a cost per machine running hour (a machine hour rate) for each of the four groups of machines.

Question

The overhead budget for the month together with data relating to cost centres is as follows: Rs Supervision 7,525 Indirect workers 6,000 Holiday pay and National Insurance 6,200 Tooling cost 9,400 Machine maintenance labour cost 4,500 Power 1,944 Small tools and supplies 1,171 Insurance of machinery 185 Insurance of building 150 Rent and rates 2,500 Depreciation of machinery 9,250

48,825__ Fundamentals of Cost and Management Accounting (Study Text) 137 | P a g e Machine group Q R S T Total Floor Space (sq meter) 1,800 1,500 800 900 5,000 Kilowatt hours 270,000 66,000 85,000 65,000 486,000 Capital cost of machines (Rs.) 30,000 30,000 8,000 16,000 74,000 Indirect workers (persons) 3 3 1 1 8 Total workers (persons) 19 24 12 7 62 Machine maintenance hours 3,000 2,000 3,000 1,000 9,000 Tooling costs (Rs) 3,500 4,300 1,000 600 9,400 Supervision costs (Rs) 2,050 2,200 1,775 1,500 7,525 Small tools and supplies (Rs) 491 441 66 173 1,171 Machine running hours 30,000 36,000 19,000 8,000 93,000 Allocate and apportion each of the costs given to the four groups of machines on a suitable basis and then calculate a cost per machine running hour (a machine hour rate) for each of the four groups of machines.

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Solution

To allocate and apportion each of the costs to the four groups of machines, we need to identify a suitable basis for each cost. Here's a possible allocation:

  1. Supervision: Allocate based on the supervision costs given for each machine group.
  2. Indirect workers: Allocate based on the number of indirect workers in each machine group.
  3. Holiday pay and National Insurance: Allocate based on the total number of workers in each machine group.
  4. Tooling cost: Allocate based on the tooling costs given for each machine group.
  5. Machine maintenance labour cost: Allocate based on the machine maintenance hours for each machine group.
  6. Power: Allocate based on the kilowatt hours used by each machine group.
  7. Small tools and supplies: Allocate based on the costs given for each machine group.
  8. Insurance of machinery: Allocate based on the capital cost of machines in each machine group.
  9. Insurance of building, Rent and rates: Allocate based on the floor space occupied by each machine group.
  10. Depreciation of machinery: Allocate based on the capital cost of machines in each machine group.

After allocating and apportioning each cost, add up all the costs for each machine group to get the total cost for each group.

Finally, to calculate the cost per machine running hour (machine hour rate) for each machine group, divide the total cost for each group by the machine running hours for that group.

This problem has been solved

Similar Questions

The overhead budget for the month together with data relating to cost centres is as follows: Rs Supervision 7,525 Indirect workers 6,000 Holiday pay and National Insurance 6,200 Tooling cost 9,400 Machine maintenance labour cost 4,500 Power 1,944 Small tools and supplies 1,171 Insurance of machinery 185 Insurance of building 150 Rent and rates 2,500 Depreciation of machinery 9,250 ________ 48,825__ Fundamentals of Cost and Management Accounting (Study Text) 137 | P a g e Machine group Q R S T Total Floor Space (sq meter) 1,800 1,500 800 900 5,000 Kilowatt hours 270,000 66,000 85,000 65,000 486,000 Capital cost of machines (Rs.) 30,000 30,000 8,000 16,000 74,000 Indirect workers (persons) 3 3 1 1 8 Total workers (persons) 19 24 12 7 62 Machine maintenance hours 3,000 2,000 3,000 1,000 9,000 Tooling costs (Rs) 3,500 4,300 1,000 600 9,400 Supervision costs (Rs) 2,050 2,200 1,775 1,500 7,525 Small tools and supplies (Rs) 491 441 66 173 1,171 Machine running hours 30,000 36,000 19,000 8,000 93,000 Allocate and apportion each of the costs given to the four groups of machines on a suitable basis and then calculate a cost per machine running hour (a machine hour rate) for each of the four groups of machines.

Fundamentals of Cost and Management Accounting (Study Text) 165 | P a g e Example Company A produces a single product with the following budget: Selling price Rs 10 Direct materials Rs 3 per unit Direct wages Rs 2 per unit Variable production overhead Re 1 per unit Fixed production overhead Rs 10,000 per month. The fixed overhead absorption rate is based on volume of 5,000 units per month. There was production of 6000units i.e 4,800 units were sold and 1200 units left in closing stock. Prepare the profit statement for the month under absorption costing.

Question 1Below are the details of a production cost center Y, during the period July – December2023:Total budgeted production overhead RM95,000Budgeted production output 2,000 unitsBudgeted direct labour hours 3,500 hoursBudgeted machine hours 4,500 hoursBudgeted direct labour costs RM25,000Budgeted direct material costs RM60,000Details of manufacturing cost for Job No. 77 per units are as follows:Direct material cost RM90Direct labour cost RM30Direct labour hours 6 hoursMachine hours 8 hoursYou are required to:a. calculate the overhead absorption rate (OAR) and cost of overhead beenabsorbed for Job No. 77 using:i. direct materials cost percentage rate (2 marks)ii. direct labour cost percentage rate (2 marks)iii. machine hour (MH) rate (2 marks)iv. direct labour hour (DHL) rate (2 marks)b. calculate the total production cost per unit for Job No. 77 when overhead beenabsorbed using:i. direct materials cost percentage rate (3 marks)ii. machine hour (MH) rate (3 marks)

Use the following information to answer the next question:Estimated manufacturing overhead$520,000Estimated machine hours16,000Actual machine hours worked15,000Actual overhead costs incurred:  Indirect materials$180,000  Indirect labour$135,000  Utilities$ 40,000  Insurance$ 20,000  Rent$150,000If the company uses a predetermined overhead rate to apply overhead, manufacturing overhead applied would be:Question 2Select one:a.$487,500b.$520,000c.$525,000d.$554,667

Our company manufactures a single product. The production budget indicates that the number of units expected to be produced are 193,000 in October, 201,500 in November, and 198,000 in December. We assign variable overhead at a rate of $0.75 per unit of production. Fixed overhead equals $150,000 per month. Compute the total budgeted overhead that would appear on the factory overhead budget for month of October.Group of answer choices$343,000.$150,000.$144,750.$301,125.$294,750.

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