ACFI2003 Written Assignment
Submit using Turnitin on Blackboard
The manufacturing cost for Buccaneers Ltd for next year is expected to be made up as follows:
| $000 | |
| Direct materials: | |
| Forming department | 450 |
| Machining department | 100 |
| Finishing department | 50 |
| Direct labour: | |
| Forming department | 180 |
| Machining department | 120 |
| Finishing department | 75 |
| Indirect materials: | |
| Forming department | 40 |
| Machining department | 30 |
| Finishing department | 10 |
| Administration department | 10 |
| Indirect labour: | |
| Forming department | 80 |
| Machining department | 70 |
| Finishing department | 60 |
| Administration department | 60 |
| Maintenance cost | 50 |
| Rent and rates | 100 |
| Heating and lighting | 20 |
| Building insurance | 10 |
| Machinery insurance | 10 |
| Depreciation of machinery | 120 |
| Total manufacturing cost | 1,645 |
The following additional information is available:
(i) Each of the four departments is treated as a separate cost centre.
(ii) All direct labour is paid $6 an hour for all hours worked.
(iii) The administration department renders personnel and general services to the production departments.
(iv) The area of the premises in which the business manufactures amounts to 50,000 square metres, divided as follows:
| Sq m | |
| Forming department | 20,000 |
| Machining department | 15,000 |
| Finishing department | 10,000 |
| Administration department | 5,000 |
(v) The maintenance employees are expected to divide their time between the production departments as follows:
| % | |
| Forming department | 15 |
| Machining department | 75 |
| Finishing department | 10 |
(vi) Machine hours are expected to be as follows:
| Hours | |
| Forming department | 5,000 |
| Machining department | 15,000 |
| Finishing department | 5,000 |
On the basis of this information:
(a) Allocate and apportion overheads to the three product cost centres. (5 marks)
(b) Deduce overhead recovery rates for each product cost centre using two different bases for each cost centre’s overheads. (6 marks)
(c) Calculate the full cost of a job with the following characteristics:
| Direct labour hours: | |
| Forming department | 4 hours |
| Machining department | 4 hours |
| Finishing department | 1 hour |
| Machine hours: | |
| Forming department | 1 hour |
| Machining department | 2 hours |
| Finishing department | 1 hour |
| Direct materials: | |
| Forming department | $40 |
| Machining department | $9 |
| Finishing department | $4 |
Use whichever of the two bases of overhead recovery, deduced in (b), that you consider more appropriate. (5 marks)
(d) Explain why you consider the basis used in (c) to be the more appropriate. (4 marks)
(Total 20 marks
The post [SOLVED] The manufacturing cost for Buccaneers Ltd for next year is expected to be made up as follows appeared first on My Assignment Online.
