# Accounting for overheads part a

1. says

Mr. Moffat,

I’ve attempted to do the test on this chapter, but can’t quite get the right answer to question 3. I get \$10 and the answer is \$13. My workings are the following. Total Overhead costs for Product X = 88,000 divide that by total hours worked on Product X (8000 *2.5) answer is 4.4, same thing for product Y (96,000/16000) = 6. Therefore, total overhead cost per unit is 10. What am I missing? Thanks in advance for the help

Rachel

• says

I think you are referring to test question 4 (not 3).

Look back at the way I answered example 3 in the lecture, because it is exactly the same idea.

You need to work out an absorption rate for each of the two departments separately.

There are no products X and Y – they are departments. The products are L and M.

So the absorption rate for department X is \$88,000 / (( 8,000 x 3.0) + (8,000 x 2.5)) = \$2 per hour.
You need to do the same for department Y.

Then you can calculate the cost per unit for M as 2.5 hours at \$2, plus 2 hours at the absorption rate for department Y.

• says

Mr. Moffat,

Yes, it was indeed question 4, and the Products X and Y that I was referring to were supposed to be L and M, apologies for the confusion. I got the right answer now. My mistake was to calculate the overhead costs by product (i.e. picking the numbers horizontally) instead of by department (then multiplying by the number of hours it takes for each product). Is it safe to say that that is the correct approach every time? i.e. to calculate departmental absorption cost first?

Thanks again!

Rachel

2. I could view it before December diet, but it all started few days to exams

• says

But you have not answered my question. Are you able to view the lectures on computer? Is all access not working, or just access on your phone?

3. Sir, I used to see your lecture videos on my android phone but, suddenly the browser just stopped working and up till now, I have not been able to see the videos again. I also downloaded several browsers but no result. Please what can I do? Or have you restricted people from Nigeria from viewing your videos?

• says

We do not restrict any countries (although countries might restrict us!).

Is it only the phone (can you view the lectures on a computer)?

4. says

hi sir
i want to ask you that i looked many questions on under/over absorption in bpp kit but i didnt see any lectures on it and also in course notes so please tell me is it in course of f2 in 2015 because i have old edition book of bpp

• says

Under/over absorption is part of absorption costing and is dealt with in that lecture.

It is in the current syllabus.

(Although you should get a current edition of the Revision Kit because the format of the exam has changed.)

• says

thanks sir……

5. says

sir
i want to ask you that i look many questions on under/over absorption in bpp kit but i didnt see any lectures on it and also in course notes……so please tel me is it in course or not because i have a book of bpp 2011 edition….

6. Hello sir John, I really enjoyed the way you teach Pls where can I found the complete part of this example 3. You didn’t finish it in the video.

7. says

Hi.

I used the production to do my overhead absorption…… 3:2 Ratio

Desk = 700000*3/5 = 420000/30000 = \$14.00
Chair= 700000*2/5 = 280000/20000= \$14.00

I know that this is not correct based on your explanation. But can you explain yes we are using the production hours and not the production units?

• says

In real life you can deal with the overheads in whichever way you think more sensible.
In exams you are told how to absorb them, and this questions says in the last line that they are to be absorbed on the basis of labour hours.

The logic is that if each desk takes 4 times as long as a chair in the factory, then it would seem only fair that they should be charged with 4 times as much in factory overheads.

(Had the question said to absorb on a unit basis, then your answer would be correct. Although you made it too complicated – all you would need to do is divide total overheads by total unit – \$700000/50000 = \$14 per unit)

8. says

hi John;
i’d like to know where i can find in here the financial accounting subject??
regards
MAX

• says

It depends which paper you want.

There are three financial accounting papers – they are F3, F7 and P2 (F3 is the basic – P2 is the most advanced)

You can find links to then from the main ACCA page.

• says

Accounting for labour is chapter 6 in the Course Notes.
There is no separate chapter for materials – the important part is covered in chapter 5, inventory control.

• says

Sir moffat, I got a personal question. I already passed my F3 ( 26 th dec 2013 ). But on my examination status on acca global it said that F3 financial accounting to be attempted. Why it didn’t said that i pass. I got 54 % and was taking private tuition with a tutor.

• says

I assume that you took the computer based exam and that it was at a licensed centre?
The firm of tutors that administered the exam should have uploaded the result to the ACCA and it should then have appeared on your account within 72 hours.

You need to contact the place where you took the exam and ask what has happened. If they do not sort it out then you need to email the ACCA as soon as possible.

• says

Yes i took a CBE exam and it was a licensed centre. I received an email from the admin of acca global on 27 th dec confirming that i passed my F3 but it still don’t appear on my examination status. I hope that i won’t have to take the exam again

• says

You certainly will not have to take the exam again.

However I would email the ACCA and ask them why it does not appear on your status.

• says

done ! thank you sir 😀

9. says

Hi

Regarding example 2:

I know this is wrong, but WHY couldnt you work out FIXED COSTS fro desks and chairs as follows:

LBR HRS for desks = 30 000 x 4 = 120 000
And so Fixed costs per desk = 700 000/120000 = 5.83

LBR HRS for chairs = 20 000 x 1 = 20 000
And so Fixed costs per chair = 700 000/20 000 = 35

Thanks

10. says

Hi would appreciate help with his Question

The following Data relates to a company’s Overhead Cost

time: 3 yrs ;OutPut (unit) 2000 : O/H Cost 8,800: Price Index 132

Current year: Output (unit) 5000: O/H Cost 31000: Price Index 164

Using the High Low Technique. what is the Variable cost per unit ( to the nearest \$0.01) express in the current year.

• says

What you need to do is restate the ‘3 years’ (I assume you mean three years ago) in current year prices.

To do this, you take the cost in the question (8800) and multiply it by 164/132.

When you have done this, you can use the normal high/low technique and the variable cost that you calculate will be in current year prices.

• says

You can find a chapter on it in the course notes. The chapter should be understandable without the need for a lecture.

11. says

Hello i dont understand at 5:10 Why exactly do we divide, i dont get the theroy side to it

• says

We are trying to calculate the cost of 1 desk. If it costs \$700,000 to make 50,000 units, then the cost of each unit is \$700,000 / 50,000. There is no theory to it

• says

Ahh, Okay Thank You I sometimes over think and complicate things – Thank You sir! :):D