Question

(a) The Meghna Company is divided into four departments: A, B and C are production

departments and D is a Service department. the actual costs for a period are as follows:

Particulars Amounts

Rent and Rates Tk.10,000

Repairs to plant 6,000

Depreciation of plant 5,000

Supervision 15,000

Fire Insurance 5,000

Electric power 9,000

Employer’s Liability Insurance 1,500

Stores overhead 5,400

Subsidy to canteen 1,500

First aid post 1,200

Premium for worker’s compensation 600

Other Information:

Description Dept. A Dept. B Dept. C Dept. D

Area Sq. ft. 1500 1100 900 500

Number of Employees 20 15 10 15

Horse power of machines 800 500 200 -

Direct Labor 60,000 40,000 30,000 20,000

Cost of plant 2,40,000 1,80,000 1,20,000 60,000

Value of stock 1,50,000 90,000 60,000 -

Light points 40 30 20 10

Value of materials used 90,000 80,000 60,000 40,000

Apportion the costs of the various departments by the most equitable method.

(b)

Alif manufacturing co. has three production departments and two service departments. In July

2010 the production overhead were as follows:

Production departments Tk. Tk.

A 10,000

B 8,000

C 12,000

Total 30,000

Service departments Tk. Tk.

E 2340

F 3000

Total 5340

Total overhead= Tk.30,000+Tk.5340

= Tk.35340

The Service department expenses are charged out on a percentage basis viz-

Service dept. Production dept. Service dept.

A B C

E 20% 25% 35% - 20%

F 25% 25% 40% 10% -

You are required to show due total overhead changeable to three production departments by

using:

a) Repeated distribution method

b) Simultaneous Equation method

Answer 1

here costs are allocated on the basis as mentioned along with the formula given down the page `