Star luggage limited was established in 1990 and produces a variety of suitcases, cabin bags and holdalls for high street stores. The company has an efficient manufacturing facility comprising two production departments, forming and finishing, and two service departments, Stores and Machine Maintenance. While direct product costs are easily established and recorded, overhead costs attributable are more difficult to ascertain. Currently, the company uses a traditional absorption costing system to assign overheads to its products.
Budgeted cost information for the month of August is shown below:
|factory building repairs||17,800|
Details relating to the company’s budgeted activity for the month of August have also been provided:
|Direct labour hours||10,800||3,780||7,020|
|floor area (square metres)||1,600||800||300||400||100|
|Value of stores issues||180,000||162,000||18,000|
|Kilowatt hours (% usage)||100||50||30||10||10|
|Value of equipment||€800,000||€400,000||€240,000||€80,000||€80,000|
(a) On the basis of the information provided above, prepare a schedule of the total budgeted overheads for each of the four departments, clearly showing the basis of apportionment.
(b) Calculate the total budgeted overheads for both production departments after the service departments have been re-apportioned to them.
(c) Compute pre-determined overhead absorption rates for each of the production departments.
|(d)||At the end of August the following information was obtained:||Forming||Finishing|
|Actual overhead costs||€248,000||€107,195|
|Actual labour hours worked||4,250||8,125|
|Actual machine hours recorded||20,950||5,750|
|Calculate the under or over absorbed overhead for the forming and finishing||departments.|