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Additional Question

Metal Lanka manufactures metal containers for the construction Industry . The factory, in
which the company undertakes all of its production, has two production departments –
‘Cutting’ and ‘Shaping’, and two service departments –‘Stores’ and ‘Maintenance’.
The information provided below has been extracted from the company’s accounts.
Allocated Overhead Costs Rs.
Cutting Department 28,000
Shaping Department 32,000
Stores Department 7,000
Maintenance Department 5,600
Other Production Overheads Rs.
Factory rent 1,050,000
Factory building insurance 140,000
Plant & machinery insurance 78,000
Plant & machinery depreciation 117,000
Canteen subsidy 300,000
Direct Costs Rs.
Cutting Department 288,000
Shaping Department 420,000

The following additional information is also provided:


Cutting Shaping Stores Maintenance
Dept. Dept. Dept. Dept.
Floor area (square metres) 36,000 24,000 6,000 4,000
Value of Plant & Machinery (Rs.) 600,000 100,000 50,000 30,000
Number of stores requisitions 2,000 1,000 0 0
Maintenance hours required 5,400 4,000 600 0
Number of employees 68 120 8 4
Machine hours 24,000 4,400 0 0
Labour hours 18,000 30,000 0 0

REQUIREMENT:
(a) Prepare an overhead analysis sheet based on the above information. You must clearly state
the basis used for any apportionments and calculate overhead absorption rate for each
department. (Use Machine hours for the Cutting Department and Labour hours for the Shaping
Department as the base to calculate OARs.)
(Rate should be calculated to two decimal places)
(16 marks)

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(b) Using the rates calculated in part (a) calculate the full production costs of the following job.
JOB NUMBER B2436
Direct Materials Rs.200
Direct Labour;
Cutting Department 20 hours at Rs.32 per hour
Shaping Department 30 hours at Rs.28 per hour
Machine hours required;
Cutting Department 40 hours
Shaping Department 24 hours
(4 marks)
(Total 20 marks)

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