CHAPTER 15 Practice Questions


Question 14 Jenson Ltd has two production departments, 1 and 2 and two ancillary service departments, A and B. The following are the expected overhead costs for the next period:


Overhead Depreciation of Equipment


Total € 24,000


Depreciation of Factory Buildings 20,000 Factory Heating Factory Cleaning Factory Canteen


12,000 2,000


10,000


The following information relates to the production and service departments of the factory: Production Dept. 1 1,600 800 80


Volume in cubic metres Floor Area in square metres Number of Employees Book Value of Equipment Machine Hours


Dept. 2 1,200 1,200 60


€10,000 3,000


€5,000 2,000


Service Dept. A 1,400 400 40


€4,000


Dept. B 800 800 20


€1,000


You are required to: (a) Calculate the overhead to be absorbed by each department stating clearly the basis of apportionment used.


(b) Transfer the service department costs to production departments 1 and 2 on the basis of machine hours.


(c) Calculate machine hour Overhead Absorption Rates for departments 1 and 2.


Question 15 Lawlor Ltd has two production departments, 1 and 2 and two ancillary service departments, A and B. The following are the expected overhead costs for the next period:


Overhead Depreciation of Equipment


Total € 28,000


Depreciation of Factory Buildings 18,000 Factory Heating Factory Cleaning Factory Canteen


8,000 4,000 6,000


The following information relates to the production and service departments of the factory: Production Dept. 1 1,200 700 69


Volume in cubic metres Floor Area in square metres Number of Employees Book Value of Equipment Machine Hours


Dept. 2 1,500 1,400 69


€12,000 4,000


€15,000 4,000


Service Dept. A 1,000 1,050 46


€6,000


Dept. B 1,300 350 46


€7,000


You are required to: (a) Calculate the overhead to be absorbed by each department stating clearly the basis of apportionment used.


(b) Transfer the service department costs to production departments 1 and 2 on the basis of machine hours.


(c) Calculate machine hour Overhead Absorption Rates for departments 1 and 2. 225 15


Familiarise yourself with what bases to apply to each overhead. Think about why they apply. This will help you remember them.


TIP


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