Cost Assignment

Ltd’s budgeted overheads for the forthcoming period applicable to its production departments, are as follows: (£000) 1 2 870 690 The budgeted total costs for the forthcoming period for the service departments, are as follows: (£000) G H 160 82 The use made of each of the services has been estimated as follows.

Ltd’s budgeted overheads for the forthcoming period applicable to its production departments, are as follows: (£000) 1 2 870 690 The budgeted total costs for the forthcoming period for the service departments, are as follows: (£000) G H 160 82 The use made of each of the services has been estimated as follows.Production department G(%) H(%) 1 60 50 Service department 2 30 30 G — 20 H 10 — Required: Apportion the service department costs to production departments: (i) using the step-wise (elimination) method, starting with G; (ii) using the reciprocal (simultaneous equation) method; (iii) commenting briefly on your figures.Department A has 10 direct employees, who each work 37 hours per week.

Budgeted overheads incurred directly by each department are: Production department A Production department B Production department C Service department £261 745 £226 120 £93 890 £53 305 The balance of budgeted overheads are apportioned to departments as follows: Production department A Production department B Production department C Service department 6 40% 35% 20% 5% COST ASSIGNMENT Service department overheads are apportioned equally to each production department.

You are required to: (a) Calculate an appropriate predetermined overhead absorption rate in each production department.

Required: Draft a memo to the Chief Accountant outlining the general characteristics and advantages of employing a successful incentive scheme.

(8 marks) (Total 25 marks) AAT Cost Accounting and Budgeting BEC Limited operates an absorption costing system.

(9 marks) (b) Calculate the manufacturing overhead cost per unit of finished product in a batch of 100 units which take 9 direct labour hours in department A and three machine hours in department B to produce.

(3 marks) (12 marks) ACCA Foundation Paper 3 PTS Limited is a manufacturing company which uses three production departments to make its product.

If the standard cost assignment in one of these infotypes is maintained, this cost assignment is used instead of the assignment in the Organizational Assignment (0001) and Cost Distribution L'affectation de cots standard gre dans un de ces infotypes remplace l'affectation des cots dfinie dans les infotypes Affectation (0001) et Ventilation des cots (0027); cette dernire aurait t utilise si les comptes The cost assignment specification per miles/kilometers (per trip segment) makes it possible for you to specify, for a trip segment, a percentage cost assignment that differs from the travel expenses assignment guideline.

Cost assignment Question IM 3.1 Intermediate (a) Explain why predetermined overhead absorption rates are preferred to overhead absorption rates calculated from factual information after the end of a financial period.

Required: (a) Calculate appropriate pre-determined absorption rates for the year ended 31 December (4 marks) COST ASSIGNMENT 9 (b) (i) Calculate the under/over absorption of overhead for each department of the company for March; (4 marks) (ii) Comment on the problems of using predetermined absorption rates based on the arbitrary apportionment of overhead costs, with regard to comparisons of actual/target performance; (4 marks) (c) State the reasons why absorption costing is used by companies.

(3 marks) (Total 15 marks) CIMA Stage 1 Accounting Question IM 3.9 Intermediate: Various overhead absorption rates AC Limited is a small company which undertakes a variety of jobs for its customers.