# Accounting for overheads part b

1. says

hey, at 27:40 the lecturer talks about rounding off to the nearest dollar… my question is if we have to round off to the next dollar whatsoever the amount is i.e if the amount is \$12.5 we round it off to \$13 but if the amount is \$12.3 do we round it to \$13 or we round it to \$12?????

2. says

depreciation of equipment am not getting it i thoght of 7000/3000000 why did you put nbv up instead of deprciation to be up kindly explain

• says

The depreciation is \$7,000. On the information given, the only sensible way of apportioning it is to base it on the net book value of the equipment in each department.
The total NBV of all the equipment is 300,000 + 300,000 + 100,000 = 700,000.
Since processing is 300,000 out of the total, the amount of depreciation given to processing is therefore 300,000/700,000 x 7,000 = 3,000. Same for the other departments.

3. says

to be specific accounting for overhead ‘b’ is showing Financial Reporting

4. says

5. says

Great explanation…BTW if i was sitting their i could point out the miscalculation. I do point while listening lecture and was rechecking…thought i might be wrong…

I didn’t ever get bore during lecture. THANKS.

6. says

Hi John. Why do you allocate the canteen expense only to canteen? I cant get the logic. Doesn’t all three departments benefit from the services of the canteen?

• says

In fact only 2 departments benefit from the canteen – the canteen is only there to feed the employees in the other 2 departments.

If you continue with the next example you will see that having got the total cost of the canteen, we then recharge it to the two production departments.

The approach is always the same – we first allocate and apportion overheads between all of the departments. Then we recharge the service departments to the production departments.

Example 4 specifically asks for the overheads to be split between all three departments; example 5 then asks for the canteen costs to be reapportioned to the other two departments.

7. says

I assume that you mean example 3 and that you have downloaded the Course Notes.

The question says (about 4 lines from the end) that the remaining overheads are to be split 40% to assembly and 60% to finishing

8. says

Can someone explain to me why the remaining fixed over cost of \$600,000 was splitted so? 40% to assembly and 60% to finishing.

9. says

I am doing FIA FA1,FA2, MA1 MA2 in June I wish I has found these videos earlier then I would not feel so lost in my class. Thank you. i watch your videos and work along with the examples before I go to my accounting classes each week. Your videos makes the topics so much clear.

10. says

For example 3, any reason why supervisors salary is considered while calculating absorption rate? I understand supervisor’s salary is non-production cost. Please help. Thanks!

• says

Assuming that the supervisor is in the factory (supervising the factory workers) then he is a production overhead

• says

unless otherwise specified in a question, it would be part of production overhead?

• says

Yes – although it would almost certainly be specified.

11. says

Thank you it is helpful. I hope the lecture also shows how can tacle the exam Q&A techniques.

God bless Opentuition!!

12. says

Hi John, the video doesn’t.work for overheads part b …. It gets stuck on 5:13 … Could you take a look please?
Btw … Good course I have been learning with a view to take F1 2 and 3 in december but could do with lots of practice questions? Any suggestions ? Thanks… Simon

• says

The video is OK – I think it must be your internet connection.

For practice questions you really need to get hold of revision/exam kist from one of the approved publishers.

13. says

Can I get the working for test question 4 (chapter 7). The answer is £2840 but how is this calculated? And would it not be more helpful to show how you get to the answer rather than just give an answer? Just a suggestion. Thanks anyway for the help and its is much appreciated.

• says

I assume you mean test question 5

Because the labour is \$400 in total and is paid \$8 per hour, it means that there must be 50 hours of labour.

Production overheads are \$26 per labour hour, and so total production overheads are 50 hours x \$26 = \$1300.

The prime cost is materials + labour = \$300 + \$400 = \$700, and so the non-production overheads are 120% x \$700 = \$840.

So……the total cost of the job is \$300 (materials) + \$400 (labour) + \$1300 (prod o/heads) + \$840 (non-prod o/heads) = \$2840

• says

Yep that’s the one. So it was just dividing the 8 per hour by labour, make sense. Thanks for the quick reply.

14. says

Dear Tutor
Why don’t we allocate Factory canteen expense base on the Number of Employees ?

• says

We have apportioned it on the number of employees.
You could have apportioned it earlier (and would have got the same final answer), but since it is a cost centre on its own it is more sensible to get the cost of the canteen separately and then apportion this cost on the basis of the number of employees.

15. says

ok i still dont get what he was doing at 23:55. did you divide 50 by 80??? or what?? because im trying to understand but still i dont get i.

• says

The answer is in one of the posts below.

The total space is 80,000 m^2. Of this, 50,000 is processing. Therefore processing has been given 50,000/80,000 of the total cost. (50/80 is the same as 50,000/80,000)

16. says

Hi I don’t understand 23.55 where did he get 50/80000 I know 80000 is the total but I don’t know where he got the 50% from can some one help me plz

• says

@hussain87, Its not 50%! It is 50,000/80,000 (or 50/80) because processing has 50,000 space out of a total space of 80,000.