OpenTuition | ACCA | CIMA
Free ACCA and CIMA on line courses | Free ACCA, CIMA, FIA Notes, Lectures, Tests and Forums
Spread the word
If you have benefited from our materials, please spread the word so more students can benefit.
To help us keep materials up to do and add new content you can also donate
May 5, 2020 at 9:24 am
Good Morning Sir,
I had a query regarding the Fixed O/Hs workings in example 2 & 3.
The Fixed O/H in example 2 is $20 for Desks & $5 for Chairs , however in example 3 the Fixed O/H are $19 ( Desks ) & $6.5 ( Chairs ).
My question is why is there this difference between the 2 examples although the number of hours each item spends in the respective department hasn’t changed ( 4 hrs & 1hr )
The Fixed costs are still $700,000 also.
Is this minor change in amount due to the apportioned costs of 60% : 40% , which are quite random in nature ?
Thank you for your reply in advance.
John Moffat says
May 5, 2020 at 4:09 pm
The difference is because we are calculating an absorption rate for each department separately rather than doing it for the factory as a whole.
The difference here may be minor, but it could be a lot greater.
You say that the apportioning is quite random, but that is not true as you will see in the later examples. It is always impossible in practice to apportion precisely but in practice we attempt to apportion as sensible as possible (and obviously in exams we do what we are told).
May 6, 2020 at 8:20 pm
Thank you for timely response. I appreciate you taking the time out to do so.
Wish you a wonderful day ahead.
May 2, 2020 at 6:19 pm
Thank you for the lesson Sir.
May 2, 2020 at 7:07 pm
You are welcome 🙂
April 23, 2020 at 12:31 pm
Thanks for the lecture.
But I think the overheads absorption rate in example 1 should be 3.5 [= 700 000/(50 000*4)] and 14 (=4*3.50) is total fixed costs.
Could you please tell me if understand correctly about this point?
April 23, 2020 at 5:04 pm
The absorption rate per unit is the fixed costs (700,000 per year) divided by the units produced per year (50,000).
The total fixed costs are given in the question and are $700,000.
February 14, 2020 at 6:35 pm
can you please explain how these numbers coming 240000 600,000(40%) can you please guide I am struck in it
March 9, 2020 at 3:29 am
600,000 x 40% (0.4) = 240,000
or another way: 600,000 x 40/100 = 240,000
February 18, 2019 at 10:11 am
March 9, 2020 at 4:03 pm
Thank you for your comment 🙂
You must be logged in to post a comment.