OVERHEADS COSTING

1. A factory has 3 production departments (P1, P2, P3) and 2 service departments (S1 & S2).
The following overheads and other information are extracted from the books for the month of
January 2023.
Expense Rs. Expense Rs.
Rent 6,000 Supervision 9,000
Repair 3,600 Fire Insurance for stock 3,000
Depreciation 2,700 ESI contribution 900
Lighting 600 Power 5,400

Particulars P1 P2 P3 S1 S2
Area sq. ft. 400 300 270 150 80
No. of workers 54 48 36 24 18
Wages 18,000 15,000 12,000 9,000 6,000
Value of plant 71,000 54,000 48,000 6,000 --
Stock Value 45,000 27,000 18,000 -- --
Horse power of plant 60 800 300 150 50
Allocate or apportion the overheads among the various departments on suitable basis.

2. The Modern 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 Rs. Particulars Rs.
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 1,500 Employer's Insurance Liability 15,000
The following information are available in respect of the four department.
Departments
Particulars
A B C D
Area (sq. ft.) 1,500 1,100 900 500
Number of employees 20 15 10 15
Horsepower of machines 800 500 200 -
Total wages (Rs.) 60,000 40,000 30,000 20,000
Value of plant (Rs.) 2,40,000 1,80,000 1,20,000 60,000
Value of stock (Rs.) 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.

3. 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 2022 :
Particulars Rs.
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
Following further details are collected for distribution of the above costs:
Departments
Particulars
X Y Z S C
Value of machinery (in Rs. '000) 60 50 80 10 -
Horse power of machines 40 45 60 5 -
Light points (Nos.) 20 30 40 20 10
Floor space (sq. meters) 150 200 250 100 50
Direct wages (in Rs. '000) 30 20 40 4 6
Prepare Primary Overheads Distribution Summary.

4. In an engineering factory, the following particulars have been extracted for the year ended
31-12-2022.
Particulars Production Department Service Department
A B C X Y
Direct Material (Rs.) 30,000 45,000 60,000 15,000 30,000
Direct wages(Rs.) 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 (Rs.) 60,000 40,000 30,000 10,000 10,000
Light Points 10 16 4 6 4
Area (sq. ft.) 150 250 50 50 50
The expenses for the period were as follows:
Particulars Rs. Particulars Rs.
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 service
department X in the ratio 5 : 3 : 2 to the production departments. You are required to prepare an
Overhead Distribution Summary.

5. The following particulars relate to a new machine:

Purchase Price Rs. 400,000
Installation Expenses Rs. 100,000
Rent per quarter Rs. 3,750
General Lighting for the total area Rs. 1,000 per month
Foreman's Salary Rs. 30,000 per annum
Insurance Premium for the machine Rs. 3,000 per annum
Departmental Overheads for the machine Rs. 5,000 per annum
Consumable Stores Rs. 4,000 per annum
Power - 2 units per hour at 50 paise per unit.
 The estimated life of the machine is 10 years and scrap value at the end of 10th year is Rs.
100,000. 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.

6. From the following information, compute machine hour rate:

Cost of machine Rs. 44,000
Scrap value Rs. 4,000
Rent for the workshop Rs. 25,000 per annum
General lighting for the workshop Rs. 160 per month
Power consumption 20 units per hour @ Rs. 20 per every 100 units
Administrative expenses allocated to the machine Rs. 4,000 per annum
Repairs and maintenance 75% of depreciation
Workshop supervisor's salary Rs. 3,000 per month
Estimated working time per year 50 weeks of 40 hours each
Setting up time which is regarded as productive time 200 hours per year
Effective life of the machine 10 years
The machine occupies 1/4th area of the workshop. The supervisor is expected to devote 1/3rd
of his time in supervising the machine.

7. Compute the machine hour rate from the following data: Rs.
Cost of machine 100,000
Installation charges 10,000
Estimated scrap value after the expiry of its life (15 years) 5,000
Rent and rates for the shop per month 200
General lighting for the shop per month 300
Insurance premium for the machine per annum 960
Repairs and maintenance expenses per annum 1,000
Power consumption - 10 units per hour -
Rate of power per 100 units 20
Estimated working hours per annum - 2,200 -
(This includes non-productive setting up time of 200 hrs.)
Shop supervisor's salary per month 600
The machine occupies 1/4th of the total area of the shop. The supervisor is expected to
devote 1/5th of his time for supervising the machine.

8. Calculate the comprehensive machine hour rate from the following details:
Bought machinery Rs. 45,000
Installation charges Rs. 5,000
Life of machine 5 years
Working hours per year 2,500
Repair charges 75% of depreciation
Electric power consumed: 10 units per hour @ 15 paise per unit
Lubricant oil Rs. 4 per day of 8 hrs.
Consumable stores @ Rs. 10 per day of 8 hrs.
Wages of machine operator @ Rs. 8 per day of 8 hrs.
9. A machine costs Rs. 1200,000 and is deemed to have a scrap value of 10% at the end of its
effective life (12 years). Ordinarily the machine is expected to run for 1,800 hours per year
but it is estimated that 200 hours of the time will be lost for normal repairs and maintenance.
Other details in respect of machine shop are as under.
Details Rs.
Annual Wages and Provident Fund contribution of each of each two operators 150,000
(each operator is in-charge of three machines)
Rent of shop per year 120,000
General lighting of the shop per month 6,000
Insurance premium for one machine per annum 28,000
Shop Supervisor’s monthly remuneration 15,000
Cost of repairs and maintenance per machine per quarter 6,000
Other Factory overheads attributable to the shop per annum 96,000
Power Consumption of machine per hour 15 units @ Rs. 6 per unit
There are six identical machines in the shop. The supervisor is expected to devote one-fifth of
time for supervising the machine. Compute the Machine hour rate from the above details.