King and Brothers is a manufacturing firm with five (5) departments. A, B, and C are production departments, while X and Y are service departments. The following data have been availed. Producing departments Service department A B C X Y Direct wages ‘000’ shs 70,000 60,000 50,000 10,000 10,000 Direct materials ‘000’ shs 30,000 25,000 20,000 15,000 10,000 Employees No.

Sep 8, 2023

King and Brothers is a manufacturing firm with five (5) departments. A, B, and C are production departments, while X and Y are service departments. The following data have been availed.

 

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King and Brothers is a manufacturing firm with five (5) departments. A, B, and C are production departments, while X and Y are service departments. The following data have been availed. Producing departments Service department A B C X Y Direct wages ‘000’ shs 70,000 60,000 50,000 10,000 10,000 Direct materials ‘000’ shs 30,000 25,000 20,000 15,000 10,000 Employees No.
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Producing departments  Service department 
A B C X Y
Direct wages ‘000’ shs 70,000 60,000 50,000 10,000 10,000
Direct materials ‘000’ shs 30,000 25,000 20,000 15,000 10,000
Employees          No. 400 300 300 100 100
Electricity           kwh 8,000 6,000 6,000 2,000 3,000
Light points          No. 10 15 15 5 5
Assets values ‘000’ shs 50,000 30,000 20,000 10,000 10,000
Area occupied SQ.YDs 800 600 600 200 200

 

The overheads were as under;
Particulars  Shs (000)
Labour welfare              30,000
Depreciation                 60,000
Heating             12,000
Rent                     6,000
Stores overhead                            4,000
Motive power                15,000
Electric lighting                2,000

Required 

  1. Using a primary overhead analysis sheet, show how the overheads in King and Brothers can be apportioned between the five departments sighting relevant bases for the apportionment.  (12 marks)
  2. For each allocation base you have selected, explain reasons suggesting why you have preferred such an allocation base? (07 marks)

     3.  Explain how predetermined overhead absorption rates can aid the costing of products and services in King  and Brothers. (06 marks)

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