Management Accounting

Management Accounting
PART A:
A furniture-making business manufactures quality furniture to customers’ orders. It has
three production departments and two service departments. Budgeted overhead costs for
the coming year are as follows:
£ Apportionment Basis
Rent and Rates 12800 Floor Area
Machine Insurance 6000 Machine Value
Telephone Charges 3200 Floor Area
Depreciation 18000 Machine Value
Production Supervisor Salary 24000 Direct Labour Hours
Heating/Lighting 6400 Floor Area
Total 70400
The three production departments – A, B & C, and the two service departments – X & Y,
are housed in one premises. Other information is given below:
A B C X Y
Floor Area (Sq. metres) 3000 1800 600 600 400
Machine value (£) 24000 10000 8000 4000 2000
Direct Labour Hours budgeted 3200 1800 1000
Labour Rates per hour £8.80 £8.50 £8.40 £7.50 £7.50
Allocated Overheads:
Specific to Each Department 2800 1700 1200 800 600
Dept. X’s costs apportioned 50% 25% 25%
Dept. Y’s costs apportioned 20% 30% 50%
Required:
1. Prepare a statement showing the overhead cost budgeted for each production
department and calculate suitable overhead absorption rates.
2. The following piece of furniture is to be manufactured. Calculate the Full Cost based
on:
Direct Material £125,
Direct Labour: 10 hours Dept A, 6 hours Dept B, 5 Hours Dept C
3. Calculate the price of the job based on a required mark-up of 25%.