ACCA MA · Guided practice (Show me how)
Chapter 8: Accounting for Overheads
Reapportioning service cost centres that work for each other
A factory has two production departments, X and Y, and two service cost centres, Stores and Maintenance.
Overheads already allocated and apportioned are: X $70,000, Y $30,000, Stores $20,000, Maintenance $15,000.
The estimated work done by the service centres for other departments is:
Stores: X 50%, Y 30%, Maintenance 20%.
Maintenance: X 45%, Y 40%, Stores 15%.
Work to the nearest $1 throughout.
(a) Solving for the two service centre totals
Calculate the total cost of Stores and the total cost of Maintenance, using the algebraic method.
(b) Reapportioning to the production departments
Calculate the Stores and Maintenance costs reapportioned to departments X and Y, and the total production overhead of each of X and Y.
(c) The same answer by repeated distribution
Calculate the total production overhead of departments X and Y using the repeated (continuous) distribution method, and show that it agrees with the totals in part (b).
Opening this exercise…