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accounting for overheads

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › accounting for overheads

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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  • Author
    Posts
  • May 6, 2017 at 8:26 am #385050
    Joe
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    Hi sir.
    This is a question from ACCA specimen exams June 2014;
    A factory consists of two production cost centres (P and Q) and two service cost centres (X and Y). The total allocated
    and apportioned overhead for each is as follows:
    P Q X Y
    $95,000 $82,000 $46,000 $30,000
    It has been estimated that each service cost centre does work for other cost centres in the following proportions:
    P Q X Y
    Percentage of service cost centre X to 50 50 – –
    Percentage of service cost centre Y to 30 60 10 –
    The reapportionment of service cost centre costs to other cost centres fully reflects the above proportions.
    After the reapportionment of service cost centre costs has been carried out, what is the total overhead for
    production cost centre P?

    The answer was worked out as follows;

    Direct cost $95,000
    Proportion of cost centre X (46,000 + (0·10*30,000))*0·50 $24,500
    Proportion of cost centre Y (30,000*0·3) $9,000
    Total overhead cost for P $128,500

    I can’t seem to understand how the answer was worked out

    May 6, 2017 at 10:25 am #385072
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    Reapportion Y first.

    To P goes 30% x 30,000 = 9,000.
    To X goes 10% x 30,000 = 3,000.
    So X is now 46,000 + 3,000 = 49,000

    Now reapportion X:

    To P goes 50% x 49,000 = 24,500

    So P is now 95,000 + 9,000 + 24,500 = 128,500

    Have you watched my free lectures on overheads? The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.

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    Posts
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