Tutorial 1 - Topic 4 - OAR - Q

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 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=

You might also like