Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

EXERCISE UNIT 2.4

QUESTION 1 (session June 2012)
Razaria Sdn Bhd, a furniture making business manufactures quality home furniture. It has three
production departments and one service center. Budgeted overhead costs for the coming year are
as follows:

Rent and rates RM12,800

Machine insurance RM6,000

Building insurance RM22,000

Power RM8,500

Depreciation (machine) RM18,000

Heating and lighting RM6,400

Production supervisor salaries RM24,000

The three production departments (P, Q and R) and one service department (S) are housed in the
new premise. The details, together with other statistics and information are as follows:

DEPARTMENTS

P Q R S

Floor area (square meter) 3,000 1,800 600 600

Machine value (RM) 24,000 10,000 8,000 400

Horse power (KWH) 10,000 10,000 5,000 200

Direct labour hours 3,200 1,800 1,000 -

Labour rates per hour (RM) 3.80 3.50 3.40 3.00

Machine hours 1,200 2,200 - -

No. of employees 14 10 4 2

1
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

DEPARTMENTS

P Q R S

Allocated overhead (RM) 2,800 1,700 1,200 800

Service department cost apportioned 50% 25% 25% -

Based on the information, you are required to: [CLO1:C3]

i. Prepare an Overhead Analysis Sheet. (13 marks)
ii. Calculate the Overhead Absorption Rate (OAR) by using DIRECT LABOUR
HOURS as a basis for Department P and R, and MACHINE HOURS for
Department Q.

QUESTION 2 (short semester 2011)

Green & Grow Sdn Bhd produces organic-based fertilizers in its Inanam factory which consists
of two (2) production departments, Departments P and Q. The data below relates to both
departments.
Production Production
Overhead items Total costs (RM) Department P Department Q
(RM) (RM)

Salary - 7,200 4,800

Rent 5,400
Supervision 4,800
Electricity 6,900 To be apportioned accordingly
Factory insurance 4,200
Depreciation of machine 10,000
Maintenance of machine 6,400

2
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

Additional information : Dept. P Dept. Q

Factory area / space 2,000 m3 1,000 m3

(meter squared, m3)
Machine working hours 25,000 hours 15,000 hours
Factory value (RM) RM 300,000 RM 100,000
Number of workers 50 100
Direct labour hours 1,500 hours 3,500 hours
Machine cost (RM) RM 40,000 RM 10,000

In November 2010, the company received an order (which will be known as G-11) , which had the
following cost information :

Item Dept. P Dept. Q

Direct materials cost RM 680 RM 1,300
Direct labour cost RM 1,450 RM 1,820
Labour hours worked 45 hours 20 hours
Machine hours used 15 hours 50 hours

You are required to :

a) Prepare the Overhead Statement Analysis showing the allocation and apportionment of
overheads for each department.
(11 marks)
b) Calculate the overhead absorption rates for each department using direct labour hours as
the basis of absorption.
(4 marks)
c) Calculate the total cost of G-11.
(10 marks)

3
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

QUESTION 3 (past semester session dec 2013)

Sunshine Sdn Bhd is a manufacturing company operating with two production departments: BB
and CC, to produce a product called ‘LAILAI’. The company also has services department: YY
and ZZ. The company has produced the following budgeted overheads to production and service
departments for the year ended 31 December 2013.
Production department Services department
BB CC YY ZZ
Overhead RM 240,000 RM 245,000 RM 75,000 RM 45,000

The expenses of the service departments are apportioned as follows:

Production department Services department
BB CC YY ZZ
YY 40% 45% - 15%
ZZ 50% 50% - -

The estimated machine hours and labour hours for two production departments are as follows:
Production departments
BB CC
Machine operating hours 20,500 13,800
Direct labour hours 50,000 40,000

You are required to:

a) Prepare an overhead analysis sheet for the year ended 31 December 2013 (8marks)

b) Calculate the pre-determined overhead absorption rates for each department using machine
hours basis for department BB and direct labour hours basis for department CC.
(4 marks)
c) The actual overhead incurred for department BB and department CC are RM 320,00 and
RM 250,000. Determine the under or over absorption of overhead for each department if
the actual machine hours for department BB is 22,000 hours and actual direct labour hours
for department CC is 32,000 hours. (8 marks)

4
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

QUESTION 4 ( session dec 2012)

Canteeq Bergaya Sdn Bhd a manufacturing company manufactured a baby shirt operating three
production departments namely Cutting department, Sewing department and Finishing
Department to produce a product called QDRESS. The company also has a maintenance
department as its service department. The company has produced the following budgeted cost
statement for the year ended 31 December 2010:
Item cost CUTTING SEWING FINISHING MAINTENA TOTAL
DEPT. DEPT. DEPT. NCE DEPT. COST (RM)
(RM) (RM) (RM) (RM)
Direct material 35,000 20,000 25,000 30,000 110,000
Direct labour 15,000 20,000 10,000 12,000 57,000
Indirect material 15,000 10,000 15,000 5,000 45,000
Indirect labour 12,000 17,000 10,000 7,500 46,500
Insurance on - - - - 5,000
machinery
Factory administrative - - - - 7,500
and personnel
Insurance on building - - - - 7,200
Rent and rates - - - - 5,000
Total cost of 283,200
production

Additional information:
Service
Items Production department
department
CUTTING SEWING FINISHING MAINTENANCE
DEPT. DEPT. DEPT DEPT
Area occupied (square 6,500 4,000 2,500 4,000
meters)
Machine value (RM) 60,000 55,000 40,000 55,000

5
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

CUTTING SEWING FINISHING MAINTENANCE

DEPT. DEPT. DEPT DEPT
Number of employees 55 60 65 50
Direct labour hours 1500 1000 2000 -
Maintenance service 6,000 2,200 4,500 -
hour
Machine hours 2,100 1,800 1,600 -

Reapportionment overhead using maintenance hours basis.

You are required to prepare overhead analyses sheet for the year ended 31 December 2010.

QUESTION 5( session dec2012)

Teebaboo Bhd is a weapon manufacturing company operating three production departments
namely BURST Dept. , BOOM Dept. and BLUST Dept. to produce a product called BOMMET.
The company also has a Maintenance Department as its service department. The company has
produced the following budgeted cost statement for year ended 31 December 2010.
Item cost BURST BOOM BLUST MAINTENANCE TOTAL
(RM) (RM) (RM) (RM) COST (RM)
Direct material 35,000 20,000 25,000 30,000 110,000
Direct labour 15,000 20,000 10,000 12,000 57,000
Indirect 15,000 10,000 15,000 5,000 45,000
material
Indirect labour 12,000 17,000 10,000 7,500 46,500
Insurance on - - - - 5,000
machinery
Factory - - - - 7,500
administrative
Insurance – - - - - 7,200
building
Rent and rates - - - - 5,000

6
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

Production - - - - 283,200
cost

Additional information:
items Production department Service
Department
BURST BOOM BLUST Maintenance Dept
(RM) (RM) (RM) (RM)
Area occupied 6,500 4,000 2,500 4,000
Machine value 60,000 55,000 40,000 55,000
Number of employees 55 60 65 50
Direct labour hours 1,500 1,000 2,000 -
Maintenance service 6,000 2,200 4,500 -
hour
Machine hours 2,100 1,800 1,600 -

Reapportionment overhead using maintenance service hours basis.

You are required to prepare an Overhead analyses sheet for year ended 31 December 2010.

QUESTION 6( session June2013)

A quality furniture manufacturer is responsible to fulfill their customers’ orders. It has three
production departments and two service departments. Overhead incurred for the recent month are
as follows:
Overhead RM
Machine insurance 8,000
Rent and rates 21,000
Indirect material 5,000
Heating and lighting 14,000
Power 7,000
Machine depreciation 24,000
Supervisor’s salaries 6,000

7
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

The three production departments A, B and C and the two service departments K and L are
housed in the same premises. The details information are given below:
A B C K L
Floor area occupied square fit 3000 1500 1500 600 400
Direct labour hours 2000 1200 1800 - -
Direct labour rate (RM) 4 3 2
Machine value (RM) 30,000 20,000 10,000
Value of material issued (RM) 100,000 50,000 30,000
No. of empoyees 60 40 20
Allocated overheads:
Specific for each department (RM) 2900 3000 4000 1500 1000
K’s cost apportioned 50% 25% 25%
L’s cost apportioned 20% 30% 50%

You are required to :

a. Idenfify the apportionment basis for each overhead item given
b. Prepare a statement of showing the overhead cost each department
c. Find overhead absorption rate
d. Calculate the over or under overhead for each department based on the actual information
below:
Dept A Dept B Dept C
Actual overhead (RM) 47,665 25,876 19,208
Direct labour hour 2,100 1,112 1,680
Value of material issued RM 150,000 RM 75,000 RM 24,000

Prepared by
Pn Norazlizah Bt Saad

8
Hp/izah/sesjune14/pa302/exercise
Dpa 5023 COST& MANAGEMENT ACCOUNTING 1 OVERHEAD

9
Hp/izah/sesjune14/pa302/exercise