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  • Tutorial 1 - Topic 4 - OAR - Q

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    Jong Hannah
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    This document provides budgeted overhead and production information for Bulan Manufacturing for the 2018 financial year. It includes data on sales, direct costs, production overhead costs, departmental overhead rates, machine details, labor hours and other metrics. The questions ask the student to 1) calculate overhead absorption rates for each overhead item, 2) allocate overhead to each department, 3) prepare an overhead analysis sheet including secondary reallocation of service department costs, and 4) calculate departmental overhead absorption rates using both a departmental rate and a blanket rate based on direct labor hours.

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    This document provides budgeted overhead and production information for Bulan Manufacturing for the 2018 financial year. It includes data on sales, direct costs, production overhead costs, departmental overhead rates, machine details, labor hours and other metrics. The questions ask the student to 1) calculate overhead absorption rates for each overhead item, 2) allocate overhead to each department, 3) prepare an overhead analysis sheet including secondary reallocation of service department costs, and 4) calculate departmental overhead absorption rates using both a departmental rate and a blanket rate based on direct labor hours.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    70 views6 pages

    Tutorial 1 - Topic 4 - OAR - Q

    Uploaded by

    Jong Hannah
    This document provides budgeted overhead and production information for Bulan Manufacturing for the 2018 financial year. It includes data on sales, direct costs, production overhead costs, departmental overhead rates, machine details, labor hours and other metrics. The questions ask the student to 1) calculate overhead absorption rates for each overhead item, 2) allocate overhead to each department, 3) prepare an overhead analysis sheet including secondary reallocation of service department costs, and 4) calculate departmental overhead absorption rates using both a departmental rate and a blanket rate based on direct labor hours.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 6

    Tutorial

    Overhead

    Question 1
    Bulan Manufacturing Berhad is a company making a single product which has two
    production department, X department is highly machined with the technology where Y
    Department is more labor intensive, and service department. The following data is the
    Budgeting Trading Account of the company for the year ending 31 May 2018:

    RM
    Sales 80,000
    Direct material 300,000
    Direct labor 280,000
    Royalties 80,000
    PRIME COST 660,000

    Indirect labor and supervision salaries: RM RM


    Department X 25,500
    Department Y 43,500
    Stores 21,000 90,000

    Depreciation for factory building


    Department X 8,500
    Department Y 13,500
    Stores 2,000 24,000

    Consumable supplies
    Department X 18,000
    Department Y 20,000
    Stores -

    Power 24,000
    Rent and rates 30,000
    Light and air conditioning 6,000
    Insurance for machine 3,000
    Depreciation of machine 78,000
    Total production overhead 300,000
    Cost of production 960,000
    Budgeted gross profit 840,000

    1
    Additional information:
    Basis Department X Department Y Stores
    Power consumption 50 50 25
    (kw/hours)
    Floor area (sq. 7,0500 5,000 3,000
    meter)
    Machine (book value 140,000 135,000 20,000
    RM)
    Direct labor hours 36,000 98,000 22,000
    Machine hours 58,500 85,300
    No. of material 70 50
    requisition note
    Hours worked for 45 55
    maintenance

    Answer:
    a) Calculate the OAR for each overhead incurred.
    Overhead Total (RM) Basis OAR
    (Budgeted OH / Budgeted Basis)
    Power 24,000 125 kwh = 24,000 / 125
    (power = RM 192 per kwh
    consumption)
    Rent and
    rates

    Light and air


    conditioning
    Insurance for
    machine

    Depreciation
    of machine
    b) Allocate each overhead to each department of Bulan Manufacturing Sdn Bhd.
    Overhead Total OAR Department Department Store
    (RM) (Budgeted OH / X Y
    Budgeted Basis)
    Power 24,000

    *Rent and
    rates

    *Light and
    air
    conditioning
    Insurance
    for machine

    Depreciation
    of machine
    c) Prepare Overhead Analysis Sheet for the year 2018. Reapportion costs of service
    department to the production cost centers (secondary distribution).
    Overhead Total OAR Department Department Store
    (RM) (Budgeted OH / X Y
    Budgeted (RM) (RM) (RM)
    Basis)
    Indirect labour 90,000 - 25,500 43,500 21,000
    and supervision
    salaries
    Depreciation for 24,000 - 8,500 13,500 2,000
    factory building

    Consumable 38,000 - 18,000 20,000 -


    supplies

    Power 24,000 = 24,000 / 125 = RM 192 x RM 192 x 50 RM 192 x


    = RM 192 per 50 kwh kwh 25 kwh
    kwh = RM 9,600 = RM 9,600 = RM
    4,800
    *Rent and rates

    *Light and air


    conditioning

    Insurance for
    machine

    Depreciation of
    machine

    Total

    Reapportionment

    Total Overhead

    d) Calculate the OAR for each production department:


    a. According to the Departmental Rate.

    OAR = Budgeted overhead / Budgeted Basis


    Department:
    X=
    Y=
    b. According to the Blanket Rate (using direct labor hour).
    OAR = Budgeted overhead / Budgeted Basis
    Department:
    X=
    Y=

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