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overhead allocation decimal place

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › overhead allocation decimal place

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 29, 2023 at 6:43 pm #687516
    rajumalukan
    Participant
    • Topics: 2
    • Replies: 2
    • ☆

    Hi sir, i understand most of the time when allocating overheads you will need to round off the amounts to whole number.

    Q1. What if the numbers are rounded up and it doesn’t match the total allocated cost, should I use 1 decimal place, 2 decimal place or other ways for the allocation of cost when the question did not mentioned anything regarding rounding off of decimal places?

    Q2. And should the decimal place be consistently applied for all costs that are allocated?

    Example:
    production department A and B both have a total cost of $10.

    Service department X has a total cost of $8. it provided 1/3 of its service to production department A, 1/3 to production department B and 1/3 to service department Z.

    Service department Z has a total cost of $10. it provided 1/6 of its service to production department A and the rest to production department B. Allocate the service departments’ using step down method.

    If allocated using 1dp:
    Allocating X’s cost: X will provide $2.7 to A, B and Z respectively, $8.10 will be the total amount subtracted from X’s cost. Z’s cost after X’s allocation would be $12.7.

    If allocated using 2dp:
    Allocating X’s cost: X will provide $2.67 to A,B and Z respectively, $8.01 will be the total amount subtracted from X’s cost. Z’s cost after X’s allocation would be $12.01.

    Both seems wrong to me when reproducing the table as what is allocated from X is greater than what it orginally has ($8).

    June 30, 2023 at 12:32 pm #687530
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    Go to two decimal places – it doesn’t matter in the exam if the costs do not add up exactly 🙂

    July 17, 2023 at 4:04 am #688186
    rajumalukan
    Participant
    • Topics: 2
    • Replies: 2
    • ☆

    Thank you sir !

    July 17, 2023 at 7:24 am #688225
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    You are welcome 🙂

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Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘overhead allocation decimal place’ is closed to new replies.

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