Practical on Appropriation of Overheads

1. A company's expenses for the year ending 30th June 2003 are given below :

Items Production Departments Office Workshop

P1 P2 P3

Direct Wages (Rs.) 20,000 25,000 30,000 - -

Direct Materials (Rs.) 30,000 35,000 45,000 - -
Indirect wages (Rs.) 3,000 3,000 4,000 10,000 5,000
Indirect Materials (Rs.) 2,000 3,000 3,000 1,100 1,850
No. of Employees 30 25 30 15 25
Value of Machinery (Rs.) 30,000 35,000 25,000 - 15,000
H.P. of Machine 15 20 25 - 5
Machine hours worked 10,000 20,000 15,000 - 5,000

General Expenses
(1) General Overhead Rs. 1,500
(2) Amenities to Staff Rs.12,500
(3) Employer's contribution to E.S.I. Rs. 1,200
(4) Power Rs. 3,800
(5) Depreciation 15% of the value of machinery

You are required to prepare an Overhead Analysis Sheet for the departments
showing clearly the basis of apportionment, where necessary.

2. Modern Manufacturing Ltd., has three production departments P1, P2, P3 and
two service departments S1 and S2 the details pertaining to which are as follows :

P1 P2 P3 S 1 S2

Direct Wages (Rs) 3,000 2,000 3,000 1,500 195

Working hours 2,560 3,000 1,500 - -
Indirect materials 300 200 200 - 266
Value of machines (Rs.) 60,000 80,000 1,00,000 5,000 5,000
H.P. of machines 60 30 50 10 -
Light points 10 15 20 10 5
Floor space (in sq.ft) 2,000 2,500 3,000 2,000 500

The following figures extracted from the accounting records are relevant :
Rent and Rates Rs. 5,000 General Lighting Rs. 600
Indirect wages Rs. 1,939 Power Rs. 1,500
Depreciation on machines Rs.10,000
 Apportion the expenses of service department S1 according to direct wages
and those of service department S2 in the ratio of 2:3:5 to the production
departments.

Find out the total cost of product X which is processed for manufacture in
departments P1 P2 and P3 for 4, 5 and 3 hours respectively, given that its direct
material cost is Rs.50 and direct labour cost is Rs.30.

3. The Dolphin India Ltd., is divided into four departments. A, B and C are
production departments and D is a service department. The actual costs
for October 2003 are as follows :

Rs.
Rent 1,000
Repairs to plant 600
Depreciation on plant 450
Light 100
Supervision 1,500
Fire insurance (stock) 500
Power 900
Employer's State Insurance Contribution 150

The following information is available in respect of the four departments :

A B C D
Area (sq.ft) 1,500 1,100 900 500
No. of employees 20 15 10 5
Direct wages (Rs.) 6,000 4,000 3,000 2,000
Value of plant (Rs.) 24,000 18,000 12,000 6,000
Value of stock (Rs.) 15,000 9,000 6,000 -

Apportion the cost to various departments by preparing overhead distribution

summary chart.

4. The following are the particulars relating to the production departments P 1

P2 and P3 and the service departments - Canteen, Powerhouse, Store, Time
Keeping, Accounts and Repair shop.

Production departments Cost after primary distribution (Rs.)

P1 20,000
P2 18,000
P3 25,000
___________________
63,000
___________________
Service department cost Rs.
Canteen 1,500
Power house (lighting) 1,200
Power house (Power) 4,000
Stores 3,600
Time keeping and accounts 3,000
Repair shop 4,500
____________
17,800
____________

Other information available

P1 P2 P3
________________________________________________________________
No. of employees 30 25 20
No. of light points 6 8 10
Horse power of machines 300 200 300
No. of requisitions 4,000 3,000 5,000
Value of assets (Rs.) 1,00,000 1,50,000 2,00,000

Show the secondary distribution on direct redistribution method.

5. In a certain factory, there are two Production departments X and Y, two

Service Departments A & B. Total expenses of the service department A are
apportioned between X, Y and B in the ratio 3 : 2 : 1 and the expenses of the service
department B are allocated between X and Y equally. From the following particulars
calculate the overheads to be allocated to Production Department X and Y.

X Y A B
Floor space (sq.ft.) 5,000 4,000 1,000 2,000
Assets (Rs. in lakhs) 10 55 3 1
H.P. of machine 100 50 40 10
No. of workers 100 50 50 25
Light points 25 15 10 10
Direct wages (Rs.) 10,000 8,000 5,000 3,000
Direct material (Rs.) 15,000 10,000 4,000
-

Total expenses and charges are : Rs.

Depreciation 38,000
Rent, Rates and Taxes 18,000
Power 12,500
Insurance on assets 9,500
Canteen expenses 5,400
Electricity 3,600
6. Bharat Engineering Works has three production departments A, B, C and one
service department S. From the under mentioned particulars calculate labour hour
rate for each of production departments. Expenses for the period of 12 months.

Rs. Rs.
Rent 36,000 Power 8,250
Indirect wages 5,200 Depreciation on machinery 22,000
Electricity 5,600 Canteen expenses 6,500

Additional information :
A B C S
Light points (Nos.) 7 7 9 5
Floor space (sq.mtr) 300 250 450
200
H.P. of machine (H.P) 65 30 30 40
No. of workers (Nos) 2 3 6
2
Direct wages (Rs.) 12,000 14,000 18,000 8,000
Cost of machine (Rs.) 50,000 60,000 80,000 10,000
Working days : 200 days of 8 hrs. each
Service rendered by service department S to production departments A, B & C is
30%, 20%, 50% respectively.

7. In a manufacturing concern there are four departments viz. A, B, C and D. A

& B are production departments. "C" renders service worth Rs.12,000 to D and
balance to A & B in the ratio of 3:2. D renders service to A & B in the ratio of 9:1.

The overhead expenses incurred in a year are as follows :

Rs. Rs.
Depreciation 95,000 Rent, rates & taxes 18,000
Insurance 7,600 Power 10,000
Canteen expenses 5,400 Electricity 2,400

Following further information are given regarding the Departments

A B C D
Rs. Rs. Rs. Rs.
Direct material 6,000 5,000 3,000 2,000
Direct labour 20,000 10,000 10,000 5,000
Floor space occupied (sq.ft) 5,000 4,000 1,000 2,000
Value of assets (in lakh) 10 5 3 1
H.P. of machine 1,000 500 400 100
No. of workers 100 50 50 25
Light and fan points 50 30 20 20
From the above particulars prepare a statement showing overhead expenses of
production departments A and B after redistribution of service departments
expenses.