TYBCOM – COST ACCOUNTING – SEM V - OVERHEADS

1. The Modern Company is divided into four departments: A, B and C are production departments and
D is service department. The actual costs for a period are as follows:
Particulars ` Particulars `
Rent 10,000 Fire insurance (Stock) 5,000
Repairs to plant 6,000 Power 9,000
Depreciation of plant 4,500 Light 1,000
Supervision 1, Employer’s Insurance Liability 1,500
500
The following information are available in respect of the four departments:
Departments
Particulars
Area (sq. ft.) 1,500 1,100 900 500
Number of employees 20 15 10 15
Horsepower of machines 800 500 200 -
Total wages (₹) 60,000 40,000 30,000 20,000
Value 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 (Nos.) 40 30 20 10

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

2. MM Ltd. Has three production departments X, Y, Z and two service departments S and C. The
following details are extracted from the books of accounts in respect of indirect expenses incurred during
April 2014:
Particulars Amount (₹)
Indirect Cost:
Indirect Wages 9,000
Lighting 1,200
Rent and Rates 12,000
Electric Power 6,000
Depreciation 24,000
Sundry Expenses 7,800
60,000

Following further details are collected for distribution of the above costs:
Departments
Particulars
X Y Z S C
Value of machinery (in `’000) 60 50 80 10 -
Horse power of machine 40 45 60 5 -
Light points (Nos.) 20 30 40 20 10
Floor space (sq. metres) 150 200 250 100 50
Direct wages (in ` ‘ 000) 30 20 40 4 6
Machine hours worked 4,250 3,380 7,120

Prepare Primary Overheads Distribution Summary.

3. The following account balance and distribution of indirect charges are taken from the accountsof a
manufacturing concern for the year ending on 31st March, 2014:
Total Production Dept. Service Dept.
Items ` X` Y` Z` A` B`
Indirect Material 1,25,000 20,000 30,000 45,000 25,000 5,000
Indirect Labour 2,60,000 45,000 50,000 70,000 60,000 35,000
Superintendent’s Salary 96,000 96,000 -
Fuel and Heat 15,000
Power 1,80,000
Rent and Rates 1,50,000
Insurance 18,000
Meal charges 60,000
Depreciation 2,70,000
The following departmental data are also available:
Production Dept. Service Dept.
Items
X Y Z A B
Area (sq. ft.) 4,400 4,000 3,000 2,400 1,200
Capital value of Assets (`) 4,00,000 6,00,000 5,00,000 1,00,000 2,00,000
Kilowatt Hours 3,500 4,000 3,000 1,500 -
Radiator Sections 20 40 60 50 30
No. of Employees 60 70 120 30 20

Prepare a Statement of primary Distribution of Overheads.

4. The following cost information for a period is available for a small engineering unit:
(a) Allocated expenditure:
Allocate
Total (`) Service Departments
Production Departments
Machinery General
Assembly Stores
Shop Plant Service
Indirect Wages 29,300 8,000 6,000 4,000 11,300
Stores consumed 6,700 2,200 1,700 1,000 1,700
Supervisory Salaries 14,000 - - 14,000 -
Other Salaries 10,000 - - 10,000 -
(b) Expenditure to be apportioned
Power and Fuel 15,000
Rent 15,000
Insurance 3,000
Depreciation 1,00,000
(c) Additional information available
Floor Area H.P. hrs. No. of Investment
(Sq. ft.) Employees (`)
Machine Shop 2,000 3,500 30 6,40,000
Assembly 1,000 500 15 2,00,000
General Plant 500 - 5 10,000
Stores 1,500 1,000 10 1,50,000

You are required to prepare an overhead primary distribution statement in detail.

 5. The Modern Company has four departments. A, B and C are the production departments and Dis a
servicing department. The actual costs for a period are as follows:
Particulars `(‘000)
Indirect Materials
Production Department : A 950
B 1,200
C 200
Servicing Department : 1,500

DIndirect Wages 900

Production Department: A 1,100
B 300
C 1,000
Servicing Department : 2,000
1,200
DRent 900
Repair 200
Depreciation
3,000
Light
1,000
Supervision
300
Insurance
1,800
Employee’s Insurance (Employer’s Liability)
Power
The following data are also available in respect of four departments:
Departments
Particulars
A` B` C` D`
Area (sq. ft.) 150 110 90 50
No. of workers (Nos.) 24 16 12 8
Total wages (‘000) 8,000 6,000 4,000 2,000
Value of Plant (‘000) 24,000 18,000 12,000 6,000
Value of Stock (‘000) 15,000 9,000 6,000 -
Apportion the above costs to the various department on the most equitable method.
Notes:
1. Insurance has been taken for stock.
2. Power expenses are to be apportioned on the basis of value of plant.

6. Small Company Ltd. has three production departments and four service departments. The
expenses for these department as per Primary Distribution Summary were:
Particulars ` `
Production Departments:
A 15,000
B 13,000 40,000
C 12,000
Service Departments:
Stores 2,000
Time-keeping 1,500 4,800
Canteen 500 44,800
Power 800
Total
The following information are also available in respect of the production departments:
Particulars Dept. A Dept. B Dept. C
Horsepower of machines 300 300 200
Number of workers 20 15 15
Value of stores requisitioned (`) 2,500 1,500 1,000

Apportion the costs of the various service departments to the production departments.

9. M & Co. has 3 production departments and 2 service departments. The expenses are as given
below:
Expenses Total (`)
Consumable Stores 15,400
Supervision 22,800
Rent & Rates 10,000
Insurance 2,000
Depreciation 30,000
Power 9,000
Light & Heat
Total 4,000
93,200
The following information is available:
Production Departments Service Departments
Bases
Machine Assembly Finishing Stores Repairs
Shop Shop Dept. &
Maint
Direct Materials 34% 39% 13% 4% 10%
Direct Wages 35% 22% 27% 10% 6%
Area (sq. ft.) 5,250 3,500 4,375 1,750 2,625
Asset Value 2,00,000 2,25,000 50,000 12,500 12,500
H.P. x Hours x LF 10,800 7,200
(a) Prepare the Primary Distribution Statement using the most appropriate basis for apportionment.
(b) The Machine Shop, Assembly Shop and Finishing Departments have issued stores requisitions in
the ratio of 9 : 6 : 5, and repairs requests in the ratio of 2 : 3 : 1. Prepare the Secondary Distribution
Statement on non-reciprocal (direct distribution) basis.

10. In an engineering factory, the following particulars have been extracted for the year ended 31-12-
2013:
Production Departments Service Departments
Particulars
A B C X Y
Direct Wages (`) 30,000 45,000 60,000 15,000 30,000
Direct Materials (`) 15,000 30,000 30,000 22,500 22,500
Staff number 1,500 2,250 2,250 750 750
Electricity (Kwh) 6,000 4,500 3,000 1,500 1,500
Asset Value (`) 60,000 40,000 30,000 10,000 10,000
Light Points 10 16 4 6 4
Area (square meters) 150 250 50 50 50
 The expenses for the period were as follows:
Particulars ` Particulars `
Power 1,100 Depreciation 30,000
Lighting 200 Repairs 6,000
Stores Overhead 800 General overheads 12,000
Welfare to staff 3,000 Rent and Taxes 550
Apportion the expenses of service department Y according to direct wages and those of servicedepartment X
in the ratio 5 : 3 : 2 to the production departments.
You are required to prepare an Overhead Distribution Summary.

11. Rasha Enterprise has three production departments A, B and C and one service departments
S. The following figures are available for one month of 25 working days of 8 hours each day. All
departments worked all these days with full attendance.
Total Service Production Department
Expenses ` Dept. ` A` B` C`
Power and Lighting 1,100 300 200 250 350
Supervisor’s Salary 1,500 - - - -
Rent 600 - - - -
Canteen Expenses 500 - - - -
Others 1,100 140 210 470 280
4,800
The following additional information is available:
Service Production Department
Particulars
Dept. A B C
Supervisor’s Salary 20% 20% 30% 30%
Floor Area in Sq. Feet 800 700 900 600
Number of workers 20 30 30 20
Service rendered by Service 20% 30% 50%
department to production department
You are required to calculate the labour hour rate of each of the department A, B and C.

12. Calculate Effective Machine Hours for the purpose of computing Machine Hour Rate in each ofthe
following alternative cases:
Case (a) Budgeted working hours 2,400, Maintenance hours 5%
Case (b) Budgeted working hours 8 hours per day for 300 days, Maintenance hours 5% Case
(c) There are 13 holidays on account for festivals and national holidays not falling on
Sundays. The factor works 8 hours a day. Maintenance hours 5%
Case (d) There are 12 holidays on account of festivals and national holidays not falling on Sundays and
Saturdays. The factory works 8 hours a day and 4 hours on Saturday. Maintenance hours 5%.
Case (e) There are 12 holidays on account of festivals and national holidays not falling on Sundays and
Saturdays. The factory works 8 hours a day and 4 hours on Saturday. Maintenance hours 5%.
Machine room normally works on 90% capacity throughout the year.
Case (f) Total working hours available per week 44 hours
Maintenance hours included in above 4 hours
Setting up time (productive) 5%
Machine hour rate is worked out at the beginning of a year on the basis of 13 week periodwhich is equal to 3
calendar months.

Case (g) Total working hours available per week 44 hours

Maintenance hours included in above 4 hours
Setting up time (unproductive) 5%
 Machine hour rate is worked out at the beginning of a year on the basis of 13 week periodwhich
is equal to 3 calendar months.
13. Calculate the machine hour rate from the following details:
Bought machinery `45,000
Installation charges Life `5,000
of machine Working 5 years
hours per yearRepair 2,500
charges 75% of depreciation
Electric power consumed: 10 units per hour @ 15 paise per unit
Lubricant oil `4 per day of 8 hours
Consumable stores @`10 per day of 8 hours
Wages of machine operator
@`8 per day of 8 hrs.

14.
The following particulars relate to a new machine:Purchase `
price 4,00,000
Installation expenses 1,00,000
Rent per quarter 3,750
General lighting for the total are 1,000 p.m.
Foreman’s salary 30,000 p.a.
Insurance premium for the machine 3,000 p.a.
Departmental overheads for the machine 5,000 p.a.
Consumable stores 4,000 p.a.

The estimated life of the machine is 10 years and scrap value at the end of 10 th year is `1,00,000. The
machine is expected to run 20,000 hours in its life time. The machine occupies 25% of total area. The
foreman devotes 1/6th of his time for the machine.

15. Particulars of three machines used in a factory are as under (six week period, 16 hours working)
Particulars Machine X ` Machine Y ` Machine Z `
Cost of Machine 10,000 15,000 20,000
No. of Workers 2 5 10
Direct Wages `300 `800 `1,200
Power `45 `80 `150
Light Points 2 4 6
Area occupied 100 sq. ft. 250 sq. ft. 400 sq. ft.
The expenses incurred during the period were as follows:
`
Power 275
Lighting 48
Rent and Rates 450
Depreciation 1,350
Repairs 1,800
Indirect Wages 460
Canteen Expenses 51
Sundries 300
Total 4,734
Compute the machine hour rate for each machine