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Lerna produces hydras in three production departments and needs to apportion budgeted monthly fixed costs between those departments. Budgeted costs are as follows:
$
Rent 2,000
Rates 1,000
Plant insurance 1,000
Plant depreciatn 1,000
Supervisor salary 7,000
Total : = 21000The following additional information is available.
Dep. A Dep. B dep. C
Area(sqr feet) 3,800 3,500 700
Value of mac. 210 110 80
($000)
No.of empl 34 16 20
Oyees.What is the total budgeted monthly fixed overhead cost for department C?
Test book answer B ($4,462.50) but not detailed.
I don’t know where you found this question, but this is more relevant to Paper F5 – not for Paper F2!
If you watch my free Paper F5 lectures on Activity Based Costing then you will have no problems with this, but again – you cannot be asked this in Paper F2.
You are referring to a post from over 5 years ago!!!
Rent and rates will be apportioned on the basis of the area; plant insurance and depreciation will be apportioned on the basis of the value of the machinery; supervisors salary will be apportioned on the basis of the number of employees.
This example is very similar to one that I work through in my free lectures on the apportionment of overheads where I explain the approach and the logic.
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