60.1K

Verified Solution

Link Copied!

Wonder Ltd. is company based in the industrial area that manufactures fishing hooks and fishing nets. The company uses predetermined overhead rates in applying overheads to production orders. In this respect it uses the cost of labour in applying overhead incurred in Department A while in Department B it uses machine hours utilized in the department. The company made the following projection at the commencement of year 2000:

	Department A Sh.	Department B Sh.
Direct materials Direct labour Production overhead Machine hours Direct labour hours	1,800,000 1,200,000 960,000 3,960,000 96,000 80,000	400,000 250,000 220,000 870,000 22,000 25,000

During the year, Job L10 consumed the following inputs:

	Department A	Department B
Direct materials Direct labour cost Machine hours Direct labour hours	Sh.11,000 Sh.9,600 768 640	Sh.2,500 Sh.2,000 176 2000

Required:

(a)What is the overhead application rate with respect to Department A and Department B?

(6 marks)

(b)What is the total cost of production of Job L10?(4 marks)

(c)At the end of the year 2000, the actual factory cost incurred amounted to Sh.944,000 in Department A andSh.231,000 in Department B.Calculate the over applied or under overhead for each Department and for the entire factory.(5marks)

Wonder Ltd. is company based in the industrial area that manufactures fishing hooks and fishing nets. The company uses predetermined overhead rates in applying overheads to production orders. In this respect it uses the cost of labour in applying overhead incurred in Department A while in Department B it uses machine hours utilized in the department. The company made the following projection at the commencement of year 2000:

	Department A Sh.	Department B Sh.
Direct materials Direct labour Production overhead Machine hours DIRECT LABOUR HOURS	1,800,000 1,200,000 960,000 3,960,000 96,000 80,000	400,000 250,000 220,000 870,000 22,000 25,000

During the year, Job L10 consumed the following inputs:

	Department A	Department B
Direct materials Direct labour cost Machine hours Direct labour hours	Sh.11,000 Sh.9,600 768 640	Sh.2,500 Sh.2,000 176 2000

Required:

(a)What is the overhead application rate with respect to Department A and Department B?

(6 marks)

(b)What is the total cost of production of Job L10?(4 marks)

(c)At the end of the year 2000, the actual factory cost incurred amounted to Sh.944,000 in Department A andSh.231,000 in Department B.Calculate the over applied or under overhead for each Department and for the entire factory.(5marks)

Answer & Explanation Solved by verified expert

See Answer