MAF 451 COSTS AND MANAGEMENT ACCOUNTING

SEMESTER 2 SESI 2018/2019

TUTORIAL 2: TRADITIONAL OVERHEAD

QUESTION 1

BJ Sdn Bhd forecasts the following production overheads for its production and service cost
centers for the year ended 2008.

Cost centers RM

Machining 340,000
Assembly 280,000
Finishing 120,000
Maintenance 90,000
Store 40,000
Total overheads 870,000

The following information relates to the above cost centers:

Cost centers
Machining Assembly Finishing Maintenance Store

Number of employee 30 80 40 20 30
Maintenance service
hours 20,000 15,000 10,000 - -
Number of material
requisitions 180 140 80 - -
Machine hours 9,000 8,000 7,000 - -
Labour hours 8,000 10,000 9,000 - -
Labour cost (RM) 30,000 90,000 60,000 - -
Direct labour rate (RM) 5.00 8.18 5.00 - -

Required:

Apportion the production overheads of the service cost centers to the production cost enters
and determine the department predetermined overhead recovery rates based on the
following basis:

Machining Machine hours

Assembly Labour hours
Finishing Labour costs
(10 marks)

1
QUESTION 2

Rahsia Maju Berhad is a manufacturing company operating with two (2) production
departments; Machining and Assembly and three (3) service departments; Canteen, Store
and Maintenance. Machining department is highly dependent on the use of machine, while
Assembly department relies on its labour force. The following budgeted cost was extracted
for the month of March 2009:

Total Machining Assembly Canteen Store Maintenance

RM RM RM RM RM RM
Direct materials 30,000 10,000 20,000
Direct labour 20,000 5,000 15,000
Indirect
materials 15,390 4,990 5,900 2,400 1,500 600
Indirect wages 24,700 5,500 8,700 4,600 3,500 2,400
Lighting 14,025
Power expenses 6,420
Depreciation on
machines 5,150

Other available information was:

Machining Assembly Canteen Store Maintenance

Number of employees 50 150 10 15 35
Value of machines (RM) 50,000 35,000 3,000 5,000 10,000
Horse power of machines 3,500 500 100 250 1,000
Light points 200 150 100 50 50
No. of store requisitions 70 110 40 - 30
Maintenance hour 195 105 - - -
Machine hours 2,500 1,050 - - -
Direct labour hours 1,100 3,000 - - -

Required:

a) Prepare a complete Overhead Analysis Sheet for the company and calculate the
overhead absorption rate for Machining and Assembly department using appropriate
basis.
(13 marks)

2
QUESTION 3

Perdana Maju Sdn Bhd operates two production departments, Machining and Assembly, and
one service department which is responsible for maintenance.

The following data relate to March 2009:

Machining Assembly Maintenance

Operating Time:
Machine hours 153,000
Direct labour hours 2,384,000

RM’000 RM’000 RM’000

Expenses Incurred:
Indirect materials 278 225 112
Indirect labour 641 488 418
Accrued Expenses:
Rent, rates and insurance 120 90 40
Depreciation 350 50 72
Supervision 400 280 100
Other Expenses:
Lighting and heating 51 38 12
Specialist servicing of equipment 18
Window cleaning contract 8 5 2

At the end of each month, the expenses of the Maintenance Department are apportioned to
the production departments on the basis of the total expenses of those departments.

The overhead absorption rates for the month of March 2009 were calculated using the
following data:

Machining Assembly
Estimated overhead for the month RM2,160,000 RM1,400,000
Estimated machine hours 144,000
Estimated direct labour hours 2,240,000

Required:

a) Calculate the overhead absorption rates for the month of March 2009 for Machining
and Assembly departments.
(2.5 marks)

b) Prepare a statement showing the actual overhead incurred by the production

departments for the month of March 2009.
(13.5 marks)

c) Calculate the extent to which the overhead expenses were over or under absorbed
by the production departments during March 2009.
(4 marks)