1. avatar says

    in question 6 we reaportion cost from service to production deptt on percentage base but if base given is number of employee then after using algebraic method we multiply it to no. of employee of particular deptt dividing total no of employee. the total no. of employee we take includes srvices deptt employee or not. say from above percentages as no of employee then reaportioning store to production deptt 1. we multiply the calculated store cost to 60 and divide by 90 instead of 100 as total base.

    • Profile photo of John Moffat says

      The object is to apportion all of the costs to the production departments.

      The canteen is a service department (and the cost of employing people in the canteen is part of the total cost of the canteen). The canteen is there to feed the workers in the production departments and therefore the cost of the canteen should be apportioned on the basis of the number of production employees.

  2. Profile photo of Ruksar says

    Hello Sir

    I tried both ways and they gave me almost the same answers. However i miss out on your lecture in terms of audio after 14.50min as i can not hear what you are explaining. please check.


  3. Profile photo of David says

    I didnt get the 0.15 x 0.20 at first but the penny has just dropped, and now I understand.

    May I ask:
    Would you be asked in any of the exams to do the algebraic version for recharging dept’s?

  4. avatar says

    I still don’t understand where the 2250 comes from , can anyone please do the algebraic method of example 6 for me step by step,,,I am totally lost, I have watched this lecture so many times but it is still not clear.

  5. Profile photo of Heba says

    Hello sir!
    Thankyou for your lectures.i have a doubt in algebraic method
    For eg: the last question 6

    0.995S =6723
    Where did this figure 0.995S come from??
    rest everything is fine but could you please explain that bit.

  6. avatar says

    Thank you so much. I became super clear..
    I have last question)))
    A company has a budgeted labor cost of 180 000 dollar for the production 30 000 units per month. Each unit is budgeted to take 3 hours of labor. The actual labour cost during the month was 160 000 dollar for 28 000 units and 85 000 hours were worked.
    What is the labour efficiency variance?.

    • Profile photo of John Moffat says

      Have you watched all the lectures? This question relates to the chapter and lecture on variance analysis, and so please do not post it under a lecture on accounting for overheads.

      You should post the question in the F2 Ask the Tutor forum (after you have watched the lecture on variance analysis).

  7. avatar says

    Hi John
    Can u help me with this question? The answer is 8 (from mock exam). can not fih=gure out somehow. Thanks
    A company produces 2 products P and Q that are both worked in 2 departments of 1 and 2.
    Each unit of P spends 1 hour in department 1 and 2 hours in department 2
    Each unit of Q spends 2 hours in department 1 and 2 hours in department 2
    The total budgeted production of P is 5000 units and Q is 10 000 units.
    The total budgeted overheads are 50 000 US dollar for department 1 and 90 000 US dollar for department 2
    What is the overhead per unit of P?

  8. Profile photo of Imran says

    Sir, could please explain the 4th test question of chapter 7,
    it’s really confusing..
    A company manufactures two products L and M in a factory divided into two cost centres, X and Y. The fol- lowing budgeted data are available: Cost centre X Y Allocated and apportioned fixed overhead
    costs____________________________$88,000 $96,000_____________________
    Direct labour hours P.u: Product L___ 3·0________ 1·0___________________________
    ___________________Product M___2·5 _________2·0__________________________
    Budgeted output is 8,000 units of each product. Fixed overhead costs are absorbed on a direct labour hour basis.
    What is the budgeted fixed overhead cost per unit for Product M?

    • Profile photo of John Moffat says

      First you have to calculate the absorption rate for each department separately.

      For department X, the total overheads are $88,000.
      The total hours worked are 8,000 x 3.0 (for product L) and 8,000 x 2.5 (for product M). That comes to a total of 44,000 hours.
      So for department X, the absorption rate is 88,000/44,0000 = $2 per hour.

      You can do the same exercise for department Y, and you should get $4 per hour.

      To get the cost for product M, it will be 2.5 hours in X at $2 per hour, plus 2.0 hours in Y at $4 per hour.

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