TUTORIAL

COST ACCOUNTING
TOPIC 3 OVERHEAD COSTING
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Question 1

The following cost data has been provided by Excel Manufacturing for Product A:

Total Overhead $16,000

Total direct labor hours for period 2,000 hours
Total direct wages $3,200
Total direct material used $2,000
Total machine hours 1,600 hours
Total units produced 80 units
Required:

Calculate the absorption rates using the following mentioned bases:

i) Direct Labor Hour

ii) Direct Wages
iii) Direct Material
iv) Prime Cost
v) Machine Hour

Question 2

At the beginning of the year 2015, Jee Mark Manufacturing Company estimated the following:

Assembly Testing Total

Department Department
Overhead $620,000 $180,000 $800,000
Direct labour hours 155,000 20,000 175,000
Machine hours 80,000 120,000 200,000

Jee Mark uses departmental overhead rates. In the assembly department, overhead is applied on
the basis of direct labour hours. In the testing department, overhead is applied on the basis of
machine hours. Actual data for the month of April are as follows:
 Assembly Testing Total
Department Department
Overhead $53,000 $15,500 $68,500
Direct labour hours 13,000 1,680 14,680
Machine hours 6,800 13,050 19,850

Required:

a) Calculate the budgeted indirect-cost rate (predetermined overhead rate) for assembly and
testing departments.

b) Calculate the overhead applied to production in each department for the month of April.

c) By how much has each department’s overhead been under allocated? Over allocated?

QUESTION 3

Shu Wei Bhd manufactures products using three Production Cost Centres - Assembly, Finishing
and Testing and two Service Cost Centres - Plant Maintenance and Administrative Support.

The budgeted production overhead costs for 2008, that had been allocated and apportioned to the
five cost centres, were as follows:-

Plant Administrator
Cost Assembly Finishing Testing Maintenance Support
Centres (RM) (RM) (RM) (RM) (RM)

Indirect
Labour 80,000 120,000 40,000 140,000 100,000

Other
Expenses 51,800 49,300 56,400 70,000 40,000

The overheads of the Service Cost Centres were re-apportioned to the Production Cost Centres
are as follows:-
Cost Centre Assembly Finishing Testing Plant Maintenance

Administrative Support 20% 20% 40% 20%

Plant Maintenance 40% 40% 20%

In the Assembly and Finishing Cost Centres, the job costing system used an overhead rate per
machine hour whilst in the Testing Cost Centre, the overhead absorption was based on a direct
labour hour rate.

The machine hours and direct labour hours for 2008 were budgeted as follows:-

Cost Centres Assembly Finishing Testing

Machine Hours 30,000 30,000 12,000
Direct labour hours 40,000 50,000 10,000

Details of Job 112 relating to the year 2008 were as follows:-

Assembly Finishing Testing

Materials – (RM) 6,000 1,000 400
Direct Labour – labour 210 150 12
Machine Hours – hours 190 160 15

Direct labour rates:-

Assembly - RM24.00 per hour
Finishing - RM25.00 per hour
Testing - RM20.00 per hour
Actual results for 2008 were:-
Assembly Finishing Testing
Overheads incurred (RM) 248,500 301,400 204,500
Actual machine hours 29,710 29,905 12,400
Actual direct labour hours 41,045 51,500 10,100

Required:

(a) Calculate the pre-determined overhead absorption rates for each of the three Production
Cost Centres for 2008.

(b) Calculate the costs for Job 112.

Question 4

YSL Co. manufactures three products: A, B, and C.

Data for the period just ended is as follows:
A B C
Production (units) 20,000 25,000 20,000
Sales price ( per unit) $20 $20 $20
Material cost (per unit) $5 $10 $10
Labour hours (per unit) 2 hours 1 hour 1 hour
(Labour is paid at the rate of $5 per hour)

Overheads for the period were as follows:

$
Set-up costs 90,000
Receiving 30,000
Despatch 15,000
Machining 55,000
$190,000
Cost driver data:
A B C
Machine hours per unit 2 2 2
Number of set-ups 10 13 2
Number of deliveries received 10 10 2
Number of orders dispatched 20 20 20

Required:

a) Prepare the overhead analysis sheet

b) Calculate the cost (and hence profit) per unit by using appropriate basis of allocation for
the overhead cost.