CBE F2 EXAM. Help!!!

Obviously June 2011..

Hi

If you sit F2 before December 2011, you will be tested on the June 2011 syllabus.
Any exams attempted from December 2011 onwards will be based on the new syllabus.

🙂

@perfectdavid
try to take some advantage from these below and tell me if any useful to you.
Indirect expenses are also known as overheads.
Production overheads are the total of indirect production costs.
Fixed production overheads=indirect materials+indirect labour+indirect expenses
Fixed production overheads of a factory will include the following costs:
Heating the factory,lighting the factory,renting the factory.
The total cost of a product also includes a share of the fixed production overheads.
Production overheads are recovered by absorbing them into the cost of a product and this process is known as absorption costing.this process reflects the amount of time and effort that has gone into making a product or service.
Absorption costing involves allocation and apportionment of overheads,reapportionment of service(non production) cost centre overheads,absorption of overheads.
If overheads relate to more than one specific department then they must be shared between these departments using a method known as apportionment.
Overheads must apportioned between different service and production departments on a fair basis.
Basis of apportionment are floor area( for rent and rates overheads), net book value of fixed assets (for depreciation and insurance of machinery),number of employees (for canteen costs).
Service cost centres are not directly involved in making products and therefore the fixed production overheads of service cost centres must be shared out between the service cost centres using a suitable basis.
Examples of service cost centres are stores,canteen,maintenance department,payroll department.
Reciprocal reapportionment or the repeated distribution method is used where service cost centres do work for each other.it involves carrying out many reapportionments until all the service departments overheads have been reapportioned to the production departments.
Overheads can be absorbed into cost units using the following bases:
Units produced, machine hour rate(when production is machine intensive),labour hour rate(when production is labour intensive),percentage of prime cost,percentage of direct wages.
It is usual for a product to pass through more than one department during the production process.
If either or both of the estimates for the budgeted overheads or the budgeted level of activity are different from the actual results for the year then this will lead to one of the following:
1: underabsorption (recovery) of overheads
2:over absorption(recovery) of overheads
if at the end of a period the overheads aborbed are greater than the actual overheads then there has been an over absorption of overheads. But if the overheads absorbed are less than the actual overheads then there has been an underabsorption of overheads.
If overabsorption occurs then the over absorbed overheads needs to be added to actual overheads in order to calculate the actual overheads absorbed.
If under absorption occurs then the under absorbed overheads needs to be deducted from actual overheads incurred in order to calculate the actual overheads absorbed.
The direct costs of production (materials,labour and expenses) are debited in the work in progress account while indirect production costs are collected in the productions overheads account.
Non production overheads are debited to one of the following:
Administrative overheads account,selling overheads account,distribution overheads account,finance overheads account.
Production overheads include rent and rates,indirect materials and indirect labour costs.
Absorbed production overheads are credited to the productions overhead account.
The under or over absorbed overheads is transferred to the income statement at the end of an accounting period.
Transactions:
1: indirect materials issued from stores
dr production overheads account cr material inventory account
2: indirect wages analysed in the labour account
dr productions over head account cr labour account
3:indirect expenses purchased(cash)
dr production overhead account cr bank
4: production overheads absorbed into the cost of production
dr work in progress account cr production overhead account
5: direct materials issued from stores
dr work in progress account cr material inventory account

FORMULAS:
1: total under or over absorption cost=actual expenditure-absorbed cost
2: machining absorption rate=direct and allocated fixed cost/machining hours
3: overheads absorbed=actual overheads-under recovery
4: overhead absorption rate=budgeted overheads/budgeted level of activity
5:overhead absorbed=actual over +over absorbed overhead
6:overhead absorption rate=budgeted production overhead/budgeted total of absorption basis