Problems on Overheads

Q. NO. 1. Moon Ltd has 4 Production Departments P, Q, R & S and one service department A. The
following details are extracted from the books of accounts in respect of indirect expenses during the
month March 2022.

PARTICULARS AMOUNT

Electric Power 2,00,000

Supervision 4,00,000

Insurance on Stock 1,60,000

Lighting 1,80,000

Employees Insurance 60,000

Repairs & Maintenance 35,000

Rent 2,50,000

Depreciation 4,20,000

Following further details are collected for distribution of the above overheads :

PARTICULARS P Q R S A

Direct Material 70,000 60,000 50,000 40,000 10,000

Value of Plant 2,00,000 1,80,000 1,60,000 1,00,000 60,000

Light Points 50 40 35 30 25

Floor Space 1400 1200 1100 900 400

Total Wages 1,00,000 80,000 50,000 50,000 20,000

Value of Stock 1,50,000 1,00,000 50,000 20,000 --

No. of Workers 250 300 100 100 50

Horse Power of Machine 200 300 100 200 200

Prepare a Statement of showing Primary distribution of overheads.

Q. NO. 2. Modern Ltd. has 3 Production Departments X, Y & Z and 2 Service Departments S1 & S2. The
following details are extracted from the books of accounts in respect of indirect expenses for the year
ended March 2022.
 PARTICULARS AMOUNT

Supervision 3,200

Factory Rent 10,000

Lighting 7,100

Depreciation on Plant 6,000

Power 18,000

Following further details are collected for distribution of the above overheads :

PARTICULARS X Y Z S1 S2

Direct Material 800 2,000 900 400 200

Indirect Wages 1,500 1,600 1,300 900 1,000

Area 800 1,000 900 700 600

No. of Light Points 15 35 8 7 6

No. of Workers 5 15 6 4 2

Value of Plant 30,000 15,000 5,000 4,000 6,000

Horse Power of Machine 4 3 3 2 --

Prepare a Statement of showing Primary distribution.

Q. NO. 3. XYZ has 5 departments A, B, C are Production Departments. D & E are Service Department.
The actual cost for the period as follows :

PARTICULARS AMOUNT

Motive Power 5,500

Lighting 1,000

Store Overheads 4,000

Staff Welfare Expenses 15,000

Rent 27,500
 Depreciation on Assets 1,50,000

Repairs 30,000

The following information is also available in respect of 5 Departments.

PARTICULARS A B C D E

Area 1,500 2,500 500 500 500

No. of Workers 100 150 150 50 50

Direct Wages 20,000 30,000 40,000 10,000 20,000

Direct Material 10,000 20,000 20,000 15,000 15,000

No. of Light Points 10 16 4 6 4

HP of Machine 4 3 2 1 1

Value of Assets 6,00,000 4,00,000 3,00,000 1,00,000 1,00,000

Prepare a statement of Primary Distribution of Overheads.

Also prepare Secondary Distribution of Overheads.

a. Overheads of Service Department D is allocated on the basis of direct wages.

b. Overheads of Service Department E is allocated on the basis of ratio 5:3:2.

Q. NO. 4. M & Company has three Production Departments and two Service Departments. The
expenses are as follows :

PARTICULARS AMOUNT

Consumable Stores 15,400

Supervision 22,800

Rent & Rates 10,000

Insurance 2,000

Depreciation 30,000

Power 9,000

Light & Heat 4,000

 TOTAL 93,200

The following information is available.

PARTICULARS Production Departments Service Departments

Machine Assembly Finishing Store Rep & Maint

Dept
Shop Shop Dept Dept

Direct Material 34% 39% 13% 4% 10%

Direct Wages 35% 22% 27% 10% 6%

Area 5,250 3,500 4,375 1,750 2,625

Assets Value 2,00,000 2,25,000 50,000 12,500 12,500

Horse Power 10,800 7,200 -- -- --

1. Prepare Primary Distribution Statement.

2. The Machine, Assembly shop and Finishing department have issue stores requisition in the ratio
of 9:6:5 and Repairs request in the ratio of 2:3:1.
3. Prepare Secondary Distribution statement on non reciprocal or direct distribution basis.

Q. NO. 5. Following data were obtained from the books of Ajit Engineering Company for the year ended
Sept 2021. Prepare a statement of Primary and Secondary distribution of overheads.

PARTICULARS Production Departments Service Department

A B C X Y

Direct Wages 7,000 6,000 5,000 1,000 1,000

Direct Material 3,000 2,500 2,000 1,500 1,000

No. of Employees 200 150 150 50 50

Electricity (KWH) 8,000 6,000 6,000 2,000 3,000

Light points 10 15 15 5 5

Assets Value 50,000 30,000 20,000 10,000 10,000

Area Occupied 800 600 600 200 200

The expenses as follows :

 PARTICULARS AMOUNT

Store Overheads 400

Motive Power 1,500

Electric Lighting 200

Labour Welfare 3,000

Depreciation 6,000

Repairs & Maintenance 1,200

General Overheads 10,000

Rent & Taxes 600

Apportion expenses of Department X in the ratio of 4:3:3 and Department Y in proportion to direct
wages to Department A, B & C.

MACHINE HOUR RATE

Q. NO. 1. The following particulars relate to new machine.

PARTICULARS AMOUNT

Purchase Price 4,00,000

Installation Expenses 1,00,000

Rent per quarter 3,750

General Lighting for the total area 1,000 p.m.

Foreman Salary 30,000 p.a.

Insurance premium for the machine 3,000 p.a.

Departmental Overheads 5,000 p.a

Consumable Stores 4,000 p.a.

1. Power 2 units per hour @ Rs. 50 per unit.

2. Estimated life of the machine is 10 years and scrap value at the end of the 10th year is Rs.
1,00,000.
3. The machine is expected to run 20,000 hours in its lifetime.
4. The machine occupies 25% of the total area.
5. Foreman devotes 1/6th of his time for the machine.

From the above information calculate the Machine hour rate.

Q. No. 2. From the following information calculate machine hour rate for the machine.

PARTICULARS AMOUNT

Purchase Price 5,00,000

Installation Expenses 40,000

Rent per quarter 20,000

General Lighting for the total area 3,000 p.m.

Foreman Salary 2,40,000 p.a.

Insurance premium for the machine 6,000 p.a.

Estimated repairs for machine p.a. 20,000

1. Power 2 units/ hours @ Rs. 500 per 1,000 units.

2. Estimated life of machine is 10 years and estimated value at the end of the 10th year is Rs.
1,00,000.
3. The machine is expected to run 20,000 hours in is lifetime. The machine occupies 1/4 th of the
total area.
4. The foreman devotes 1/4th of his time to this machine.