QUESTION 1 (Final 2016 Set A)

Creative House Berhad is a company that offer selections of the high quality jackets. The
products has to go through three processing departments which are Designing, Colouring and
Drying. The service cost centres are maintenance and canteen.

Below are the budgeted production data and factory costs for the year 2016:

RM
Allocated overheads: Designing 250,000
Colouring 350,000
Drying 150,000
Maintenance 50,000
Canteen 95,000

Other overheads: Depreciation of building 150,000

Water and electricity 250,000
Supervision 90,000

Other information is available as follows:

Designing Colouring Drying Maintenance Canteen Total

Floor space
1,600 1,400 1,000 200 800 5,000
occupied
Value of
building 320 230 120 50 80 800
(RM’000)
Maintenance
1,500 1,000 1,700 - 800 5,000
hours
Number of
100,000 140,000 60,000 - - 300,000
labour hours
Number of
200,000 36,000 90,000 - - 326,000
machine hours

The actual result for 2016 is as follow:

Designing Colouring Drying

Overhead incurred (RM) 350,500 700,000 100,000

Direct labour hours 80,000 150,000 50,000
Machine hours 150,000 25,000 80,000

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REQUIRED:

(a) Prepare the company’s overhead analysis sheet for the year. (All answers
to be rounded up to the nearest RM).

(b) Calculate the following absorption rate for each department using the
appropriate basis. (All answers to be rounded up to TWO decimal places).

(c) Shows the over or under absorption of overhead cost for each department.
(d) State two (2) production overhead costs that might occur in a manufacturing company
other than the costs already stated in the question.

QUESTION 2

Hastro Inc. has two production departments and one maintenance department in its
factory. Production in department Z1 is labour oriented, while Z2 is machine oriented.
The estimated overhead for March 2015 are as follows:

Power and Electricity RM 15 000

Rent RM 24 000
Fuel and Traveling Expenses RM 20 000
Depreciation on plant RM 16 000
Depreciation on vehicles RM 12 000

The following information is provided:

Z1 Z2 Maintenance
RM RM RM
Indirect allocated cost
50 500 28 500 10 800
(RM)
Apportionment basis:
Floor space (sq.ft) 70 000 50 000 30 000
Vehicle value (RM) 68 000 30 000 40 000
Plant value (RM) 30 000 47 000 -
Absorption basis (Hour) 10 000 15 000 -

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Maintenance overhead cost is at the ratio of 2:3 for Z1 and Z2 respectively. At the
end of March overhead incurred for Z1 were RM 102, 000 and for Z2 were RM 81, 500
and the actual labour hour were 9 500 hours and machine hour were 14 800 hours

REQUIRED:

(a) Calculate the overhead cost for each department using overhead analysis
statement (round your answer to the nearest RM)
[10 marks]

(b) Calculate the overhead absorption rate for production department Z1 and Z2
(round your answer to TWO decimal places)
[4 marks]

(c) Determine the under and over absorb overhead cost for Z1 and Z2 on March
2015
[4 marks]

(d) Differentiate between actual costing and normal costing [2 marks]

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QUESTION 3 (FINAL SESSION 3/2021)

Pak Ya Food Industry is a local food manufacturer in Muar producing a Malay delicacy called Vanila
Bahulu. The company has two departments; Machining and Finishing and two service departments;
Maintenance and Store. The Machining department is machine oriented while the Finishing department
is labour oriented.

The following is the budgeted data for Pak Ya Food Industry for the year 2021:

PRODUCTION DEPARTMENTS SERVICE DEPARTMENTS

Machining Finishing Maintenance Store
Indirect Materials(RM) 25,000 14,000 - -
Indirect labour (RM) 8,000 6,000 5,000 1,000
Utilities - - - -
Plant depreciation (RM) - - - -
Area occupied(sq feet) 12,500 6,000 1,000 500
Machine hours 32,000 8,000 - -
Direct labour hours 15,000 20,000 - -
No. of store requisitions 20 50 10 -
Maintenance hours 16,000 3,800 - 200
Plant at cost (RM) 100,000 60,000 20,000 20,000

The expenses of Maintenance and store are apportioned as follows:

Machining Finishing Maintenance Store
Maintenance 50% 50% - -
Store 10% 90% - -

Required:

i. Re-apportion total overhead of service departments into production departments.

ii. Calculate the predetermined overhead absorption rate for each production department
using the appropriate basis.
iii. Compute the under and over absorption overheads for each production department if the
actual data is as follows:

Machining Finishing
Overhead Incurred(RM) 80,500 39,800
Direct labour hour 14,450 19,400
Machine hours 31,800 6,700

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QUESTION 4 ( TEST LABOUR JO2017)
Living Micro Sdn Bhd uses a system of absorption costing. The product passes through a
machining department and assembly department before it is completed. The machining
department is machine intensive and the assembly department is labour intensive.

The company cost accountant has estimated the following overhead for the financial year
ended 30 June 2017.

RM
Indirect expenses: Machining 38,400
Assembly 62,600
Maintenance 24,000
Canteen 24,000

Electricity : Power ( 1/5 Administrative ) 62,000

Supervisory wages 54,000
Rent and rates 21,000
Insurance : Machinery 16,740
Premises ( 1/5 Administrative) 7,000
Depreciation of machinery 41,850

The following information should be used to determine the appropriate basis of

apportionment for the year.
PRODUCTION SERVICE DEPARTMENT
DEPARTMENT
MACHINING ASSEMBLY MAINTENANCE CANTEEN
Value of RM 81,000 RM 27,000
machinery
Machine Hours 30,000 6,000
Power (kilowatt 45,000 25,000 20,000 10,000
hours)
Direct labour 35,000 105,000
hours
Number of 20 60 5 5
employees
Floor area 11,000 8,000 200 800
(Square meter)
Maintenance 50,000 10,000 32,000 8,000
hours

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It is company policy to apportion the maintenance department’s costs between the other three
departments to eliminate those costs before apportioning the canteen costs between the
production departments.
REQUIRED:

a) Prepare a statement to show the total production overheads for each

department (work to the nearest RM). Show the apportionment basis selected.
[7 marks]
b) Calculate the overhead absorption rate (OHAR) for each Production
Department using suitable basis. ( Answer to be rounded to two decimal place)
[4 marks]
c) Using department overhead rates, determine over or under absorption of
overheads in each cost centre. Actual results from the production cost centres
for the year were:
MACHINING ASSEMBLY
ACTUAL OVERHEAD RM158,300 RM63,400
MACHINE HOURS 28,500 5,000
DIRECT LABOUR HOUR 15,000 31,050

[4 marks]
d) Living Micro Sdn Bhd is currently produces CIP and WIP products. Below are
the estimated cost incurred in order to produce a unit of product.

CIP WIP
PRIME COST (RM) 5.84 4.84
DIRECT LABOUR HOUR PER
UNIT IN ASSEMBLY 0.15 0.12
DEPARTMENT
MACHINE HOUR PER UNIT
IN MACHINING DEPARTMENT 0.20 0.10

Calculate the production cost per unit of CIP and WIP using the OHAR as
calculated above.
[ 6 marks]
e) What is cost allocation ?
[1 marks]
f) Explain the process of cost apportionment .List one (1) example of cost
centre.