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{"id":5927,"date":"2022-01-11T12:23:58","date_gmt":"2022-01-11T06:38:58","guid":{"rendered":"https:\/\/eponlinestudy.com\/?p=5927"},"modified":"2022-03-25T21:38:11","modified_gmt":"2022-03-25T15:53:11","slug":"accounting-for-overhead-direct-distribution-method-direct-distribution-of-overhead-secondary-distribution","status":"publish","type":"post","link":"https:\/\/eponlinestudy.com\/accounting-for-overhead-direct-distribution-method-direct-distribution-of-overhead-secondary-distribution\/","title":{"rendered":"Accounting for Overhead | Direct Distribution Method | Problems and Solutions"},"content":{"rendered":"

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

\u00a0<\/p>\n

Accounting for Overhead | Direct Distribution Method | <\/strong>Secondary Distribution <\/strong><\/span><\/h2>\n

Secondary Distribution <\/span><\/b><\/h3>\n

The process of redistributing the cost of service departments among production departments is known as secondary distribution. <\/span><\/p>\n

Here, the cost of service department means the apportioned overheads plus direct materials plus direct labour and direct expenses of concerned service department.<\/span><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Allocation of Overhead | Direct Distribution Method<\/span><\/b><\/h3>\n

Under this method, the costs of service department are NOT distributed or apportioned to production department. <\/span><\/p>\n

Overcharge and under charge is ignored in this method. <\/span><\/p>\n

\u00a0<\/span><\/p>\n

According to this method, the rate of overhead equals the total costs of the enterprise expressed as a fraction of the direct material costs. <\/span><\/p>\n

Rate of overhead = Total overhead costs \u00f7 Total direct material cost<\/span><\/p>\n

\u00a0<\/span><\/p>\n

This method has the serious drawback that values of materials used in different items of manufacture may vary widely.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1A<\/span><\/b><\/p>\n

CK Corporation has following extracted data for the current year:<\/span><\/p>\n\n\n\n\n\n\n
\n

Fuel<\/span><\/p>\n<\/td>\n

\n

$80,000<\/span><\/p>\n<\/td>\n

\n

Lighting expenses<\/span><\/p>\n<\/td>\n

\n

$40,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Repair of plant<\/span><\/p>\n<\/td>\n

\n

$75,000<\/span><\/p>\n<\/td>\n

\n

General overhead<\/span><\/p>\n<\/td>\n

\n

$50,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rant and tax<\/span><\/p>\n<\/td>\n

\n

$60,000<\/span><\/p>\n<\/td>\n

\n

Supervision<\/span><\/p>\n<\/td>\n

\n

$30,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Cafeteria<\/span><\/p>\n<\/td>\n

\n

$25,000<\/span><\/p>\n<\/td>\n

\n

Depreciation (building)<\/span><\/p>\n<\/td>\n

\n

$70,000<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/p>\n

Additional information:<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n
\n

Activities <\/span><\/p>\n<\/td>\n

\n

Production<\/span><\/p>\n<\/td>\n

\n

Service<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

X<\/span><\/p>\n<\/td>\n

\n

Y<\/span><\/p>\n<\/td>\n

\n

P<\/span><\/p>\n<\/td>\n

\n

Q<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

DLH<\/span><\/p>\n<\/td>\n

\n

40,000<\/span><\/p>\n<\/td>\n

\n

30,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine capacity (Kw)<\/span><\/p>\n<\/td>\n

\n

8<\/span><\/p>\n<\/td>\n

\n

5<\/span><\/p>\n<\/td>\n

\n

3<\/span><\/p>\n<\/td>\n

\n

4<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Value of plant ($)<\/span><\/p>\n<\/td>\n

\n

600,000<\/span><\/p>\n<\/td>\n

\n

400,000<\/span><\/p>\n<\/td>\n

\n

200,000<\/span><\/p>\n<\/td>\n

\n

300,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Space (square meter)<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

3,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Light point (No.)<\/span><\/p>\n<\/td>\n

\n

50<\/span><\/p>\n<\/td>\n

\n

30<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

No. of workers<\/span><\/p>\n<\/td>\n

\n

40<\/span><\/p>\n<\/td>\n

\n

30<\/span><\/p>\n<\/td>\n

\n

20<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Required: Overhead distribution sheet<\/span><\/p>\n

[Answer: Total overhead: X = $176,000; Y = $122,500; <\/span><\/i><\/p>\n

P = $68,000; Q = $63,500]<\/span><\/i><\/p>\n

SOLUTION: <\/span><\/b><\/p>\n

Allocation of Overhead Direct Distribution Sheet<\/span><\/b><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Activities <\/span><\/p>\n<\/td>\n

\n

Base and ratio <\/span><\/p>\n<\/td>\n

\n

Total<\/span><\/p>\n<\/td>\n

\n

Production<\/span><\/p>\n<\/td>\n

\n

Service<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

X<\/span><\/p>\n<\/td>\n

\n

Y<\/span><\/p>\n<\/td>\n

\n

P<\/span><\/p>\n<\/td>\n

\n

Q<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Fuel<\/span><\/p>\n<\/td>\n

\n

Kw <\/span><\/p>\n<\/td>\n

\n

8:5:3:4 = 20<\/span><\/p>\n<\/td>\n

\n

80,000<\/span><\/p>\n<\/td>\n

\n

32,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

16,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Repair of plant<\/span><\/p>\n<\/td>\n

\n

Value of plant<\/span><\/p>\n<\/td>\n

\n

6:4:2:3 = 15<\/span><\/p>\n<\/td>\n

\n

75,000<\/span><\/p>\n<\/td>\n

\n

30,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

15,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rant and tax<\/span><\/p>\n<\/td>\n

\n

Space <\/span><\/p>\n<\/td>\n

\n

4:3:2:1 = 10<\/span><\/p>\n<\/td>\n

\n

60,000<\/span><\/p>\n<\/td>\n

\n

24,000<\/span><\/p>\n<\/td>\n

\n

18,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Cafeteria<\/span><\/p>\n<\/td>\n

\n

No. of workers<\/span><\/p>\n<\/td>\n

\n

4:3:2:1 = 10<\/span><\/p>\n<\/td>\n

\n

25,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

7,500<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

2,500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Lighting expenses<\/span><\/p>\n<\/td>\n

\n

Light point<\/span><\/p>\n<\/td>\n

\n

5:3:1:1 = 10<\/span><\/p>\n<\/td>\n

\n

40,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

General overhead<\/span><\/p>\n<\/td>\n

\n

DLH <\/span><\/p>\n<\/td>\n

\n

4:3:1:2 = 10<\/span><\/p>\n<\/td>\n

\n

50,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

15,000<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Supervision<\/span><\/p>\n<\/td>\n

\n

No. of workers<\/span><\/p>\n<\/td>\n

\n

4:3:2:1 = 10<\/span><\/p>\n<\/td>\n

\n

30,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

9,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

3,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation<\/span><\/p>\n<\/td>\n

\n

Space\u00a0 <\/span><\/p>\n<\/td>\n

\n

4:3:2:1 = 10<\/span><\/p>\n<\/td>\n

\n

70,000<\/span><\/p>\n<\/td>\n

\n

28,000<\/span><\/p>\n<\/td>\n

\n

21,000<\/span><\/p>\n<\/td>\n

\n

14,000<\/span><\/p>\n<\/td>\n

\n

7,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Total overhead <\/span><\/p>\n<\/td>\n

\n

430,000<\/span><\/p>\n<\/td>\n

\n

176,000<\/span><\/p>\n<\/td>\n

\n

122,500<\/span><\/p>\n<\/td>\n

\n

68,000<\/span><\/p>\n<\/td>\n

\n

63,500<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/i><\/p>\n

Fuel is distributed in kilowatt<\/span><\/i><\/p>\n\n\n\n\n\n\n\n
\n

Allocated amount<\/span><\/i><\/p>\n<\/td>\n

\n

= Amount x (Ratio <\/span><\/i>\u00f7<\/span><\/i> Sum of ratio) <\/span><\/i><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/i><\/p>\n<\/td>\n<\/tr>\n

\n

Production X<\/span><\/i><\/p>\n<\/td>\n

\n

= $80,000 x 8 \u00f7 20<\/span><\/i><\/p>\n<\/td>\n

\n

= $32,000<\/span><\/i><\/p>\n<\/td>\n<\/tr>\n

\n

Production Y<\/span><\/i><\/p>\n<\/td>\n

\n

= $80,000 x 5 \u00f7 20<\/span><\/i><\/p>\n<\/td>\n

\n

= $20,000<\/span><\/i><\/p>\n<\/td>\n<\/tr>\n

\n

Service P<\/span><\/i><\/p>\n<\/td>\n

\n

= $80,000 x 3 \u00f7 20<\/span><\/i><\/p>\n<\/td>\n

\n

= $12,000<\/span><\/i><\/p>\n<\/td>\n<\/tr>\n

\n

Service Q<\/span><\/i><\/p>\n<\/td>\n

\n

= $80,000 x 4 \u00f7 20<\/span><\/i><\/p>\n<\/td>\n

\n

= $16,000<\/span><\/i><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/b><\/p>\n

Note:<\/span><\/i><\/b> <\/i><\/b>The entire amounts related to overhead or ratios are allocated as above method. <\/span><\/i><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Keep in Mind (KIM)<\/span><\/b><\/p>\n\n\n\n\n\n\n
\n

Direct materials and direct wages of production are not recorded in production department. <\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Direct materials and direct wages of service department are recorded in service department.<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Direct materials and direct wages of service department become indirect overhead for production department. <\/span><\/p>\n<\/td>\n<\/tr>\n

\n

When indirect materials and indirect wages given in the question, they should be written in production department as well service department. <\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

###########<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Click on the link for <\/span>YouTube<\/span><\/b> videos<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Accounting Equation<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/c89jkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Journal Entries in Nepali<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/uaakkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Journal Entries<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/8aakkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Journal Entry and Ledger<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/caakkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Ledger<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/haakkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Subsidiary Book<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/399jkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Cashbook<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/889jkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Trial Balance and Adjusted Trial Balance<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/c59jkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Bank Reconciliation Statement (BRS)<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/q59jkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/ugakkz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Click on the link for <\/span>YouTube<\/span> videos chapter wise\u00a0 <\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Financial Accounting and Analysis (All videos)<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/jlersz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Accounting Process<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/mlersz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Accounting for Long Lived Assets<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/plersz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Analysis of Financial Statement<\/span><\/p>\n<\/td>\n

\n

http:\/\/tiny.cc\/slersz<\/span><\/a><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

###########<\/span><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1B\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/b>TU: 2063 modified <\/span><\/b><\/b><\/p>\n

The overheads of MN Factory for the previous month are as follows:<\/span><\/p>\n\n\n\n\n\n
\n

Rent<\/span><\/p>\n<\/td>\n

\n

\u00a0$8,000<\/span><\/p>\n<\/td>\n

\n

General expenses<\/span><\/p>\n<\/td>\n

\n

\u00a0$10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Salaries<\/span><\/p>\n<\/td>\n

\n

$13,500<\/span><\/p>\n<\/td>\n

\n

Depreciation charged<\/span><\/p>\n<\/td>\n

\n

12% p.a.<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Diesel<\/span><\/p>\n<\/td>\n

\n

$16,000<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Other information:<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n
\n

Particulars <\/span><\/p>\n<\/td>\n

\n

Boiling Section<\/span><\/p>\n<\/td>\n

\n

Filtering Section<\/span><\/p>\n<\/td>\n

\n

Packaging Section<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Indirect material ($)<\/span><\/p>\n<\/td>\n

\n

40,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

25,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Indirect wages ($)<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

15,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Cost of machine ($)<\/span><\/p>\n<\/td>\n

\n

800,000<\/span><\/p>\n<\/td>\n

\n

600,000<\/span><\/p>\n<\/td>\n

\n

400,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Area used (square feet)\u00a0\u00a0\u00a0\u00a0 .<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

H.P. of machine<\/span><\/p>\n<\/td>\n

\n

40<\/span><\/p>\n<\/td>\n

\n

30<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Numbers of workers<\/span><\/p>\n<\/td>\n

\n

40<\/span><\/p>\n<\/td>\n

\n

25<\/span><\/p>\n<\/td>\n

\n

25<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Labour hours <\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Required: (a) Total overhead; (b) Labour hour rate for each section<\/span><\/p>\n

[Answer: Total overhead = $91,000; $61,750; $52,750;<\/span><\/i><\/p>\n

LHR: $18.20; $15.44 and $52.75]<\/span><\/i><\/p>\n

SOLUTION\u00a0 <\/span><\/b><\/p>\n

Primary Distribution of Overhead<\/span><\/b><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Particulars \/ expenses <\/span><\/p>\n<\/td>\n

\n

Basis and ratio<\/span><\/p>\n<\/td>\n

\n

Total <\/span><\/p>\n<\/td>\n

\n

Boiling <\/span><\/p>\n<\/td>\n

\n

Filtering <\/span><\/p>\n<\/td>\n

\n

Packaging <\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Indirect materials\u00a0 <\/span><\/p>\n<\/td>\n

\n

Direct<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

85,000<\/span><\/p>\n<\/td>\n

\n

40,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

25,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Indirect wages <\/span><\/p>\n<\/td>\n

\n

Direct<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

55,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

15,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rent <\/span><\/p>\n<\/td>\n

\n

Area\/Space<\/span><\/p>\n<\/td>\n

\n

2:1:1 = 4<\/span><\/p>\n<\/td>\n

\n

8,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Diesel <\/span><\/p>\n<\/td>\n

\n

HP<\/span><\/p>\n<\/td>\n

\n

4:3:1 = 8<\/span><\/p>\n<\/td>\n

\n

16,000<\/span><\/p>\n<\/td>\n

\n

8,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Salaries<\/span><\/p>\n<\/td>\n

\n

No. of workers<\/span><\/p>\n<\/td>\n

\n

8:5:5 = 18<\/span><\/p>\n<\/td>\n

\n

13,500<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

3,750<\/span><\/p>\n<\/td>\n

\n

3,750<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

General expenses <\/span><\/p>\n<\/td>\n

\n

Labour hours<\/span><\/p>\n<\/td>\n

\n

5:4:1 = 10<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation <\/span><\/p>\n<\/td>\n

\n

Cost @ 1%.<\/span><\/p>\n<\/td>\n

\n

monthly<\/span><\/p>\n<\/td>\n

\n

18,000<\/span><\/p>\n<\/td>\n

\n

8,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Total overhead<\/span><\/p>\n<\/td>\n

\n

205,500<\/span><\/p>\n<\/td>\n

\n

91,000<\/span><\/p>\n<\/td>\n

\n

61,750<\/span><\/p>\n<\/td>\n

\n

52,750<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Labour hours <\/span><\/p>\n<\/td>\n

\n

\u2013 <\/span><\/p>\n<\/td>\n

\n

5,000 <\/span><\/p>\n<\/td>\n

\n

4,000 <\/span><\/p>\n<\/td>\n

\n

1,000 <\/span><\/p>\n<\/td>\n<\/tr>\n

\n

LHR\u00a0 = Total overhead \u00f7 Labour hours<\/span><\/p>\n<\/td>\n

\n

\u2013 <\/span><\/p>\n<\/td>\n

\n

\u00a018.20<\/span><\/p>\n<\/td>\n

\n

\u00a015.44<\/span><\/p>\n<\/td>\n

\n

52.75<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Click on the photo for FREE <\/span><\/b>e<\/span><\/b>Books<\/span><\/b><\/p>\n

\"\"<\/span><\/a><\/span><\/p>\n

\u00a0<\/span><\/span><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1C\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/b>TU: 2064 modified <\/span><\/b><\/b><\/p>\n

The picture of the three production departments of EP Manufacturing Company the last month are as follows:<\/span><\/p>\n\n\n\n\n\n\n\n\n\n
\n

Particulars <\/span><\/p>\n<\/td>\n

\n

X<\/span><\/p>\n<\/td>\n

\n

Y<\/span><\/p>\n<\/td>\n

\n

Z<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine value ($)<\/span><\/p>\n<\/td>\n

\n

400,000<\/span><\/p>\n<\/td>\n

\n

400,000<\/span><\/p>\n<\/td>\n

\n

200,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Sales value ($)<\/span><\/p>\n<\/td>\n

\n

600,000<\/span><\/p>\n<\/td>\n

\n

400,000<\/span><\/p>\n<\/td>\n

\n

400,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machines operating hours<\/span><\/p>\n<\/td>\n

\n

8,000<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Material consumed (kg)<\/span><\/p>\n<\/td>\n

\n

40,000<\/span><\/p>\n<\/td>\n

\n

30,000<\/span><\/p>\n<\/td>\n

\n

30,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Number of workers<\/span><\/p>\n<\/td>\n

\n

60<\/span><\/p>\n<\/td>\n

\n

50<\/span><\/p>\n<\/td>\n

\n

50<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation per year<\/span><\/p>\n<\/td>\n

\n

20%<\/span><\/p>\n<\/td>\n

\n

15%<\/span><\/p>\n<\/td>\n

\n

12%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/p>\n

The following expenses were incurred for that month:<\/span><\/p>\n\n\n\n\n\n
\n

Wages office expenses<\/span><\/p>\n<\/td>\n

\n

$32,000<\/span><\/p>\n<\/td>\n

\n

Cafeteria overheads<\/span><\/p>\n<\/td>\n

\n

$24,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Selling and distribution expenses<\/span><\/p>\n<\/td>\n

\n

$42,000<\/span><\/p>\n<\/td>\n

\n

Power for the machine<\/span><\/p>\n<\/td>\n

\n

$36,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Store overheads<\/span><\/p>\n<\/td>\n

\n

$20,000<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Required: (a) Total overhead; (b) Per machine operating hours\u00a0 <\/span><\/p>\n

[Answer: Total overhead = $143,000; $105,500; $69,500;<\/span><\/i><\/p>\n

MHR:\u00a0 X =$17.88; Y = $21.10; Z = $13.90]<\/span><\/i><\/p>\n

SOLUTION\u00a0 <\/span><\/b><\/p>\n

Allocation of Overhead Direct Distribution Sheet<\/strong><\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Particulars \/ expenses <\/span><\/p>\n<\/td>\n

\n

Basis and ratio<\/span><\/p>\n<\/td>\n

\n

Total<\/span><\/p>\n<\/td>\n

\n

Departments<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

X<\/span><\/p>\n<\/td>\n

\n

Y<\/span><\/p>\n<\/td>\n

\n

Z<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Wage office expenses <\/span><\/p>\n<\/td>\n

\n

No. of workers<\/span><\/p>\n<\/td>\n

\n

6:5:5 = 16<\/span><\/p>\n<\/td>\n

\n

32,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

S&D expenses <\/span><\/p>\n<\/td>\n

\n

Sales value<\/span><\/p>\n<\/td>\n

\n

3:2:2 = 7<\/span><\/p>\n<\/td>\n

\n

42,000<\/span><\/p>\n<\/td>\n

\n

18,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Store overhead <\/span><\/p>\n<\/td>\n

\n

Materials consumed<\/span><\/p>\n<\/td>\n

\n

4:3:3 = 10<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n

\n

8,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Cafeteria overhead <\/span><\/p>\n<\/td>\n

\n

No. of workers<\/span><\/p>\n<\/td>\n

\n

6:5:5 = 16<\/span><\/p>\n<\/td>\n

\n

24,000<\/span><\/p>\n<\/td>\n

\n

9,000<\/span><\/p>\n<\/td>\n

\n

7,500<\/span><\/p>\n<\/td>\n

\n

7,500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Power for machine<\/span><\/p>\n<\/td>\n

\n

MH<\/span><\/p>\n<\/td>\n

\n

8:5:5 = 18<\/span><\/p>\n<\/td>\n

\n

36,000<\/span><\/p>\n<\/td>\n

\n

16,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation\u00a0 <\/span><\/p>\n<\/td>\n

\n

Given % viz<\/span><\/p>\n<\/td>\n

\n

20%: 15%: 12%<\/span><\/p>\n<\/td>\n

\n

164,000<\/span><\/p>\n<\/td>\n

\n

80,000<\/span><\/p>\n<\/td>\n

\n

60,000<\/span><\/p>\n<\/td>\n

\n

24,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Total overhead <\/span><\/p>\n<\/td>\n

\n

318,000<\/span><\/p>\n<\/td>\n

\n

143,000<\/span><\/p>\n<\/td>\n

\n

105,500<\/span><\/p>\n<\/td>\n

\n

69,500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine hours <\/span><\/p>\n<\/td>\n

\n

\u2013 <\/span><\/p>\n<\/td>\n

\n

8,000 <\/span><\/p>\n<\/td>\n

\n

5,000\u00a0 <\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine hour rate = Total overhead \u00f7 Machine hours <\/span><\/p>\n<\/td>\n

\n

\u2013 <\/span><\/p>\n<\/td>\n

\n

17.875<\/span><\/p>\n<\/td>\n

\n

\u00a021.10<\/span><\/p>\n<\/td>\n

\n

13.90<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b>\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1D\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/b>TU: 2065 modified <\/span><\/b><\/b><\/p>\n

EP Juice Factory incurred the following overhead:<\/span><\/p>\n\n\n\n\n\n
\n

Wages to the store staff<\/span><\/p>\n<\/td>\n

\n

$16,000<\/span><\/p>\n<\/td>\n

\n

Light and heating<\/span><\/p>\n<\/td>\n

\n

$10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Canteen foods<\/span><\/p>\n<\/td>\n

\n

$20,000<\/span><\/p>\n<\/td>\n

\n

Insurance premium on machine<\/span><\/p>\n<\/td>\n

\n

$10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rent<\/span><\/p>\n<\/td>\n

\n

$24,000<\/span><\/p>\n<\/td>\n

\n

Diesel<\/span><\/p>\n<\/td>\n

\n

$40,000<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/p>\n

The particulars of the operating division of the factory are as follows:<\/span><\/p>\n\n\n\n\n\n\n\n\n
\n

Particulars <\/span><\/p>\n<\/td>\n

\n

Processing<\/span><\/p>\n<\/td>\n

\n

Pressing<\/span><\/p>\n<\/td>\n

\n

Finishing<\/span><\/p>\n<\/td>\n

\n

Store<\/span><\/p>\n<\/td>\n

\n

Canteen<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

No. of light points <\/span><\/p>\n<\/td>\n

\n

20<\/span><\/p>\n<\/td>\n

\n

15<\/span><\/p>\n<\/td>\n

\n

5<\/span><\/p>\n<\/td>\n

\n

5<\/span><\/p>\n<\/td>\n

\n

5<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Space occupied (square meter)<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

500<\/span><\/p>\n<\/td>\n

\n

500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine cost (in thousand $)<\/span><\/p>\n<\/td>\n

\n

100<\/span><\/p>\n<\/td>\n

\n

60<\/span><\/p>\n<\/td>\n

\n

20<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Kilowatt of machine <\/span><\/p>\n<\/td>\n

\n

4<\/span><\/p>\n<\/td>\n

\n

2.5<\/span><\/p>\n<\/td>\n

\n

1.5<\/span><\/p>\n<\/td>\n

\n

1<\/span><\/p>\n<\/td>\n

\n

1<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine operating hours <\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

400<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Required: (a) Distribution of overhead by using suitable basis; (b) Find out overhead per machine operating hours <\/span><\/p>\n

[Answer: Total overhead= $37,000; $22,000; $11,000; $23,000; $27,000]<\/span><\/i><\/p>\n

MHR = $37; $22; $5.50; $23; $67.50]<\/span><\/i><\/p>\n

SOLUTION <\/span><\/b><\/p>\n

Allocation of Overhead Direct Distribution Sheet<\/strong><\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Activities <\/span><\/p>\n<\/td>\n

\n

Base and ratio <\/span><\/p>\n<\/td>\n

\n

Process<\/span><\/p>\n<\/td>\n

\n

Pressing<\/span><\/p>\n<\/td>\n

\n

Finishing<\/span><\/p>\n<\/td>\n

\n

Store<\/span><\/p>\n<\/td>\n

\n

Canteen<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Wages of store staff<\/span><\/p>\n<\/td>\n

\n

Direct <\/span><\/p>\n<\/td>\n

\n

\u2212<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

16,000<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Canteen foods<\/span><\/p>\n<\/td>\n

\n

Direct <\/span><\/p>\n<\/td>\n

\n

\u2212<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

–<\/span><\/p>\n<\/td>\n

\n

20,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rent <\/span><\/p>\n<\/td>\n

\n

Space<\/span><\/p>\n<\/td>\n

\n

8:4:2:1:1 = 16<\/span><\/p>\n<\/td>\n

\n

12,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

3,000<\/span><\/p>\n<\/td>\n

\n

1,500<\/span><\/p>\n<\/td>\n

\n

1,500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Lighting and heating <\/span><\/p>\n<\/td>\n

\n

Points<\/span><\/p>\n<\/td>\n

\n

4:3:1:1:1 = 10<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

3,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Insurance on mach.<\/span><\/p>\n<\/td>\n

\n

Value<\/span><\/p>\n<\/td>\n

\n

10:6:2:1:1 = 20<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

3,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

500<\/span><\/p>\n<\/td>\n

\n

500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Diesel <\/span><\/p>\n<\/td>\n

\n

Kw<\/span><\/p>\n<\/td>\n

\n

4:2.5:1.5:1:1 = 10<\/span><\/p>\n<\/td>\n

\n

16,000<\/span><\/p>\n<\/td>\n

\n

10,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n

\n

4,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Total overhead <\/span><\/p>\n<\/td>\n

\n

37,000<\/span><\/p>\n<\/td>\n

\n

22,000<\/span><\/p>\n<\/td>\n

\n

11,000<\/span><\/p>\n<\/td>\n

\n

23,000<\/span><\/p>\n<\/td>\n

\n

27,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Machine hours <\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

400<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

MHR = Total overhead \u00f7\u00a0 Machine hour <\/span><\/p>\n<\/td>\n

\n

37<\/span><\/p>\n<\/td>\n

\n

22<\/span><\/p>\n<\/td>\n

\n

5.50<\/span><\/p>\n<\/td>\n

\n

23<\/span><\/p>\n<\/td>\n

\n

67.50<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/p>\n

#####<\/span><\/p>\n\n\n\n
\n

Problems\u00a0 and\u00a0 Answers\u00a0 of\u00a0 Accounting \u00a0for \u00a0Overhead<\/span><\/b><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1A<\/span><\/b>\u00a0<\/span><\/b><\/p>\n

EP Manufacturing Company has following departments where working 8 hours a day for 25 working days in a month: <\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n
\n

Activities <\/span><\/p>\n<\/td>\n

\n

Total<\/span><\/p>\n<\/td>\n

\n

Service Dept<\/span><\/p>\n<\/td>\n

\n

Production<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

(Workshop)<\/span><\/p>\n<\/td>\n

\n

A<\/span><\/p>\n<\/td>\n

\n

B<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

No of workers <\/span><\/p>\n<\/td>\n

\n

50<\/span><\/p>\n<\/td>\n

\n

10<\/span><\/p>\n<\/td>\n

\n

15<\/span><\/p>\n<\/td>\n

\n

25<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Space occupied in square feet <\/span><\/p>\n<\/td>\n

\n

100<\/span><\/p>\n<\/td>\n

\n

20<\/span><\/p>\n<\/td>\n

\n

20<\/span><\/p>\n<\/td>\n

\n

60<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Service received by production departments (in %)<\/span><\/p>\n<\/td>\n

\n

100<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n

\n

40<\/span><\/p>\n<\/td>\n

\n

60<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Supervisor’s salary<\/span><\/p>\n<\/td>\n

\n

(<\/span>$<\/span>\/\u20b9\/Rs)<\/span><\/p>\n<\/td>\n

\n

13,000<\/span><\/p>\n<\/td>\n

\n

2,000<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

6,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Power<\/span><\/p>\n<\/td>\n

\n

(<\/span>$<\/span>\/\u20b9\/Rs)<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

300<\/span><\/p>\n<\/td>\n

\n

300<\/span><\/p>\n<\/td>\n

\n

400<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rent<\/span><\/p>\n<\/td>\n

\n

(<\/span>$<\/span>\/\u20b9\/Rs)<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Welfare<\/span><\/p>\n<\/td>\n

\n

(<\/span>$<\/span>\/\u20b9\/Rs)<\/span><\/p>\n<\/td>\n

\n

1,000<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Required: (a) Total overhead; (b) Labour hour rate<\/span><\/p>\n

[Answer: Total overhead: Service = $3,500; A = $8,000; B = $12,000; <\/span><\/i><\/p>\n

LHR: A = $2.67; B = $2.40; *TLH = No. of worker x 25 days x 8 hours <\/span><\/i><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1B<\/span><\/b><\/p>\n

ABC Manufacturing Company having following production departments provides you the information mentioned as follows (Amount in <\/span>$<\/span>\/\u20b9\/Rs):<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Departments<\/span><\/p>\n<\/td>\n

\n

Total<\/span><\/p>\n<\/td>\n

\n

A<\/span><\/p>\n<\/td>\n

\n

B<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Space occupied in square feet<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

400<\/span><\/p>\n<\/td>\n

\n

500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

No of workers engaged<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

50<\/span><\/p>\n<\/td>\n

\n

100<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

H.P. of machine<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

100<\/span><\/p>\n<\/td>\n

\n

50<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Expenses and charges are:<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation<\/span><\/p>\n<\/td>\n

\n

$19,000<\/span><\/p>\n<\/td>\n

\n

$11,000<\/span><\/p>\n<\/td>\n

\n

$8,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Rent and rate<\/span><\/p>\n<\/td>\n

\n

$27,000<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Power expenses<\/span><\/p>\n<\/td>\n

\n

$36,900<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Welfare and canteen expenses<\/span><\/p>\n<\/td>\n

\n

$15,600<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n

\n

\u2014<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Other overhead cost<\/span><\/p>\n<\/td>\n

\n

$4,800<\/span><\/p>\n<\/td>\n

\n

$2,800<\/span><\/p>\n<\/td>\n

\n

$2,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Labour hours worked<\/span><\/p>\n<\/td>\n

\n

2,800 hours<\/span><\/p>\n<\/td>\n

\n

1,600 hours<\/span><\/p>\n<\/td>\n

\n

1,200 hours<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Required: (a) Statement showing apportionment of overhead; (b) Overhead rate per direct labour hour<\/span><\/p>\n

\u00a0[Answer: Total overhead (A) = $55,600; (B) = $47,700;<\/span><\/i><\/p>\n

\u00a0LHR (A) = $34.75; (B) = $39.75]<\/span><\/i><\/p>\n

\u00a0<\/span><\/b><\/p>\n

Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n

PROBLEM: 1C<\/span><\/b><\/p>\n

The details of overheads and other information relating to two production departments are as under for the current month:<\/span><\/p>\n\n\n\n\n\n
\n

Particulars <\/span><\/i><\/p>\n<\/td>\n

\n

Amount <\/span><\/i><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

Rent<\/span><\/p>\n<\/td>\n

\n

15,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Power<\/span><\/p>\n<\/td>\n

\n

5,000 <\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

Labour welfare<\/span><\/p>\n<\/td>\n

\n

5,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Insurance premium on machine<\/span><\/p>\n<\/td>\n

\n

17,500<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

Repair and maintenance<\/span><\/p>\n<\/td>\n

\n

2,625<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/span><\/p>\n

Other information:<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Particulars<\/span><\/p>\n<\/td>\n

\n

Departments<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

X<\/span><\/p>\n<\/td>\n

\n

Y<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Indirect costs per month:<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n

\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Materials\u00a0 in rupees<\/span><\/p>\n<\/td>\n

\n

$25,000<\/span><\/p>\n<\/td>\n

\n

$12,500<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Labour in rupees<\/span><\/p>\n<\/td>\n

\n

$10,000<\/span><\/p>\n<\/td>\n

\n

$10,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Value of the machine used in rupees<\/span><\/p>\n<\/td>\n

\n

$100,000<\/span><\/p>\n<\/td>\n

\n

$75,000<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Number of employees<\/span><\/p>\n<\/td>\n

\n

60<\/span><\/p>\n<\/td>\n

\n

40<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Horse power of machinery used<\/span><\/p>\n<\/td>\n

\n

30<\/span><\/p>\n<\/td>\n

\n

20<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Area occupancy (in square meter)<\/span><\/p>\n<\/td>\n

\n

75<\/span><\/p>\n<\/td>\n

\n

25<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Operating machine hour per month <\/span><\/p>\n<\/td>\n

\n

1,000 hours<\/span><\/p>\n<\/td>\n

\n

700 hours<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Depreciation rate per annum<\/span><\/p>\n<\/td>\n

\n

12%<\/span><\/p>\n<\/td>\n

\n

12%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0Required: Total overhead and overhead rate per month machine hour for production department X and Y <\/span><\/p>\n

[Answer: Total overhead: X = $75,750; Y = $47,570; <\/span><\/i><\/p>\n

MHR: X = $75.75 and Y = $68.39]<\/span><\/i><\/p>\n

\u00a0<\/span><\/b><\/p>\n

\u00a0<\/span><\/p>\n

***** EP <\/span>Online <\/span>Study *****<\/span><\/p>\n

Thank you for investing your time.<\/span><\/i><\/p>\n

Please comment on the article.<\/span><\/i><\/p>\n

You can help us by sharing this post on your social media platform.<\/span><\/i><\/p>\n

\u00a0<\/span><\/p>\n

Jay G<\/span>o<\/span>o<\/span>g<\/span>l<\/span>e<\/span>, Jay YouTube<\/span>, Jay Social Media<\/span><\/span><\/p>\n

\u091c\u092f<\/span> \u0917\u0942<\/span>\u0917<\/span>\u0932<\/span>.<\/span> \u091c\u092f<\/span> \u092f\u0941\u091f\u094d\u092f\u0941\u092c<\/span>,<\/span> \u091c\u092f<\/span> \u0938\u094b\u0936\u0932<\/span> \u092e\u0940\u0921\u093f\u092f\u093e\u00a0<\/span><\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

    \u00a0 Accounting for Overhead | Direct Distribution Method | Secondary Distribution Secondary Distribution The process of redistributing the cost of service departments among production departments is known as secondary distribution. Here, the cost of service department means the apportioned overheads plus direct materials plus direct labour and direct expenses of concerned service department. […]<\/p>\n","protected":false},"author":19997,"featured_media":5929,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2916,2306,11],"tags":[2927,2920,2925,2926,2922,2921,2929,2923,2924],"writers":[144],"yoast_head":"\nAccounting for Overhead | Direct Distribution Method | Problems and Solutions<\/title>\n<meta name=\"description\" content=\"Under direct distribution method, the costs of service department are distributed or apportioned to production department.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/eponlinestudy.com\/accounting-for-overhead-direct-distribution-method-direct-distribution-of-overhead-secondary-distribution\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" 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