Question

A business produces skateboards according to individual customer requests. It consists of four departments: Preparation, Machining, Assembly and General Administration (incl. HR). The skateboards pass through the first three departments (= product cost centres), whereas the General Administration department renders services to all of the three manufacturing departments in the proportion of people working in the three manufacturing departments. Overheads for next month are expected to be as follows: Type of indirect cost: Rent for whole site €14,000 Insurance of the whole site €2,000 Electricity for heating & €5,500 lighting Cleaning of whole site €2,500 €5,000 Depreciation of machines Electricity to power machines €3,600 Canteen staff TOTAL OVERHEADS: €8,500 €41,100 * Machine-related overheads (depreciation and electricity fo power machines) are all allocated to the Machining department. * Rent, insurance, electricity for heating & lighting as well as site cleaning costs are apportioned to the 4 departments according to the floor space covered by each department: Preparation: 1,600 m? Machining: 4,000 mAssembly: 2,000 m? General Administration: 400 m2 * The cost of the canteen staff is apportioned to all departments based on the number of people working in the four departments. Manufacturing departments: Preparation: 24, Machining: 16, Assembly: 32 Service department: General Admin: 8 What amount of overheads is allocated to the "Preparation" cost centre before re-apportionment of the service cost centre's overheads? Answer: € (do not enter commas or dots separating blocks of thousands) What amount of overheads is allocated to the "Machining" cost centre? Answer: € What amount of overheads is allocated to the "Assembly" cost centre? Answer: € What amount of overheads is allocated to the "General Administration" cost centre before re-apportionment of its overheads to the product cost centres? Answer: €

Answer 1

Answer is given below

For Question no. 2 and 3 it is presumed Service department cost is part of allocation since question does not mention specifically about it

Amount of Overhead allocated to "Preparation" Cost Centre before re-apportionment €7,350 Amount of Overhead allocated to "Machining" Cost Centre €22,756 Amount of Overhead allocated to "Assembly" Cost Centre € 10,311 Amount of Overhead allocated to General Administration before re-apportionment to product CC € 2,050 Initial allocation of Cost Indirect Cost Allocation basis General Administration € 700 € 100 € 275 € 125 Rent Floor space Insurance Floor space Electricity for heating & lighting Floor space Cleaning Floor space Depreciation Direct Allocation electricity to power machine Direct Allocation Canteen Cost Number of people Total Cost Preparation Machining Assembly € 2,800 € 7,000 €3,500 € 400 € 1,000 € 500 €1,100 €2,750 €1,375 € 500 €1,250 € 625 €5,000 € 3,600 €2,550 €1,700 €3,400 € 7,350 € 22,300 € 9,400 Total Cost € 14,000 € 2,000 € 5,500 € 2,500 €5,000 € 3,600 € 8,500 €41,100 €2,050 Allocation of Service Department cost Indirect Cost Allocation basis Direct Cost Reallocation of General adm cost Number of Employees ( 24:16:32) Total Cost Preparation Machining Assembly. General mby Administration € 7,350 €22,300 €9,400 € 2,050 €683 €456 €911 - € 2,050 Total Cost € 41,100 € 8,033 € 22,756 € 10,311 €0 €41,100 Working note Total Allocation basis Floor space (Sq meters) % of Floor space Preparation Machining Assembly 1,600 4,000 20% 50% 25% General Administration 400 2,000 5% 8,000 100% Canteen Number of employees % of Employees - 24 30% 16 20% 32 40% 8 10% 80 100%