3901846 overhead distribution

7/29/2019 3901846 Overhead Distribution

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PARAMJIT SHARMA

Overheaddistribution



PARAMJIT SHARMA

Departmentalization

1 Process of dividing the factory into number

of Segments Is called Departmentalization

P1 S1P2 P3 S1

Prod Departments Service Dept.



PARAMJIT SHARMA

Departmentalization

2 Process of allocating and apportioning

POHEs to different departments or

cost centers (Prod & Service )

P1 S1P2 P3 S1


Factory

Overheads



PARAMJIT SHARMA

Departmentalization

P1 S1P2 P3 S1


Factory

Overheads

Allocation &

Apportionment



PARAMJIT SHARMA

Service Departments

Time-Keeping

Repair Department

MaintenanceDepartment

Canteen Purchase

Tool Room

Boiler

House

Personnel

Department

Power House

Fire Protection

Stores

Transport



PARAMJIT SHARMA

Distribution of

Overhead

ALLOCATION APPORTIONMENT

Specific

Costs

CommonCosts



PARAMJIT SHARMA

Distribution of

Overhead

ALLOCATION

Specific

Costs

Allocating wholeamount Of an item

of POHs to the

department for which

The expenditure was

incurred



PARAMJIT SHARMA

Distribution of

Overhead

APPORTIONMENT

CommonCosts

Common costs are apportioned

Amongst different departments

or cost centers on some basis



PARAMJIT SHARMA

Principal Basis of Apportionment Of Overheads

Floor Area

Capital Value Of Assets

Number Of Employees

Machine Hours

Direct Labour Hours

Light Points

Kilowatt Hours

Technical Analysis



PARAMJIT SHARMA

BASIS FOR APPORTIONMENT

Rent, Rates & Taxes, Lighting & Heating

Insurance & depreciation of Building,Cost of repairs & maintenance of

Building, Air Conditioning

Floor Area

Occupied

Insurance & Depreciation on Plant &

Machinery, maintenance of PM,

Insurance on building, etc

Capital

Value

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http://images.google.co.in/imgres?imgurl=http://www.southafrica.be/images/Embassy%2520Building.jpg&imgrefurl=http://www.southafrica.be/embassy.htm&h=1200&w=1600&sz=289&tbnid=BIkfOkBc7IcJ:&tbnh=112&tbnw=150&hl=en&start=3&prev=/images%3Fq%3Dbuilding%26svnum%3D10%26hl%3Den%26lr%3D



PARAMJIT SHARMA


No.Of

Employees

Repairs & Maintenance of Plant &

Machinery

Machine

Hours

Welfare Expenses, time-Keeping ,pay-rollOffice, Canteen, Recreation, Supervision

Medical Expenses

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http://images.google.co.in/imgres?imgurl=http://www.spywarebegone.com/employees-main.jpg&imgrefurl=http://www.spywarebegone.com/companyinfo.html&h=211&w=210&sz=29&tbnid=hk6OvUfGc4oJ:&tbnh=101&tbnw=100&hl=en&start=4&prev=/images%3Fq%3Demployees%26svnum%3D10%26hl%3Den%26lr%3D



PARAMJIT SHARMA


Light Points

Or

Kilowatt Hours

DirectLabour

Hrs

Work’s Manager’s Remuneration, Salary of Supervisors etc

Electricity Charges



PARAMJIT SHARMA


Technical

Estimate

Where not possible to apportion on some

Bases Technical estimate is made

Horse

Power Motive Power Expenses



PARAMJIT SHARMA


Store Keeping Expenses

Value or Weight of

Materials

Transport Service Expenses

Truck Mileage

Tonnage

Truck Hours

No.Of Pakages



PARAMJIT SHARMA

PRINCIPLES OF APPORTIONMENTPRINCIPLES OF APPORTIONMENT

UtilityUtility or or

ServiceServicePrinciplePrinciple

Ability To PayAbility To Pay

Survey MethodSurvey Method

EfficiencyEfficiency

PrinciplePrinciple



PARAMJIT SHARMA


UtilityUtility or or

ServiceServicePrinciplePrinciple

Service or Benefits

receivedBy the department



PARAMJIT SHARMA


Ability To PayAbility To Pay

What the Traffic can bear What the Traffic can bear

Basis of Sales or ProfitBasis of Sales or Profit



PARAMJIT SHARMA


Survey MethodSurvey Method

When Difficult to select BasisWhen Difficult to select Basis

Production Manager’s SalaryProduction Manager’s Salary(Time spent in Each Dept)(Time spent in Each Dept)



PARAMJIT SHARMA


EfficiencyEfficiency

PrinciplePrinciple

Out put as the basisOut put as the basis

Higher ProductionHigher Production

Low Overhead RateLow Overhead Rate

Low ProductionLow ProductionHigh OH RateHigh OH Rate



PARAMJIT SHARMA

Quick Check

Identify the Basis for following Overheads

RentPlant Repairs

Power

Depreciation of Building

Building Repairs

Insurance Of Building

Fire Insurance of Stock

Lighting Expenses

Supervision

Power

ESI

Employer’s Cont. to PFAmenities To Staff

Canteen

Gn. Overheads

Floor AreaValue of PlantMachine Hours/HP/VMValue Of BuildingValue Of BuildingFloor AreaValue Of StockNo.Of Light PointsNo.Of EmployeesKilowatt/Value of PlantDirect Wages

Direct WagesNo.Of Employees/WagesNo.Of EmployeesDirect Wages



PARAMJIT SHARMA

Summary Of Departmental Overhead Distribution

Particulars Basis Total(Rs)

Production Departments A B C D

(Rs) (Rs) (Rs) (Rs)

Rent Area(15:11:9:5) 2,000 750 550 450 250

Plant Maintenance Value Of Mch. (4:3:2:1) 1,200 480 360 240 120

Depreciation Value Of Mch. (4:3:2:1) 900 360 270 180

90Lighting Area(15:11:9:5) 200 75 55 45

25

Insurance Stock Value(5:3:2) 1,000 500 300 200

--

Employer's Cont to PF Wages (4:3:2:1) 300 120 90 60

30

Energy Value Of Mch. (4:3:2:1) 1,800 720 540 360180

Supervision No.Of Emp (6:4:3:2) 3,000 1,200 800 600

400

Total 10,400 4,205 2,965 2,135 1,095



PARAMJIT SHARMA

Summary Of Departmental Overhead Distribution

Particulars Basis Total(Rs)

Production Dept.

A B C D

(Rs) (Rs) (Rs) (Rs)

SD

Rent Area 10,000 3,750 2,750 2,250 1,250

Repairs To Plant Value Of Plant 6,000 2,400 1,800 1,200 600

Depreciation “ 4,500 1,800 1,350 900 450Lighting Light Points 1,000 375 275 225 125

Supervision No Of Employees 15,000 6,000 4,500 3,000 1,500

Fire Insurance Value Of Stock 5,000 2,500 1,500 1,000 -

Power Value Of Plant 9,000 3,600 2,700 1,800 900

ESI Wages 1,500 600 400 300 200

Total 52,000 21,500 15,27510,675 5,025



PARAMJIT SHARMA

Redistribution of Overheads

Reapportionment of OverheadsSecondary Distribution Of Overheads



PARAMJIT SHARMA

Production

Departments

Service

Departments

Carry out the

central purposes

of an organization.

Provide support

that facilitates the

activities of production

departments.

Service Department Cost

Re-Apportionment



PARAMJIT SHARMA

First, we identify the factor that drives costs in the

service department.

This cost driver is usedas the apportionment base.

The Need for Cost

Re-Apportionment

How are servicedepartment costs

charged to operating

departments?



PARAMJIT SHARMA

The Need for Cost Apportionment

Second, we measure theconsumption of the

apportionment base in theoperating departments.



PARAMJIT SHARMA


Third, we apportionthe service

department costbased on the

relative amount of the apportionment baseused in each

operating department.



PARAMJIT SHARMA

What happens toservice department

costs after theyare apportioned to

operatingdepartments?


Apportioned service departmentcosts become a part of the overhead in each

operating department.



PARAMJIT SHARMA


First Stage ApportionmentService department costs are

apportioned to operatingdepartments.

Service

Department

(Cafeteria)

Service

Department

(Accounting)

Service

Department

(Personnel)

OperatingDepartment

(Machining)

OperatingDepartment

(Assembly)

The

Products



PARAMJIT SHARMA


Service

Department

(Cafeteria)

Service

Department

(Accounting)

Service

Department

(Personnel)

OperatingDepartment

(Machining)

OperatingDepartment

(Assembly)

The

Products

Second Stage Apportionment

Operating department overhead costs andapportioned service department costs are

applied to products.



PARAMJIT SHARMA

Selecting Apportionment Bases

Personnel:

Number of employees

Receiving:

Unitshandled

Security:

Squarefootage

Power:

Kilowatthours

Cafeteria:

Number of employees

Custodial:

Squarefootage

Accounting:

Staff hours

Criteria

Easiest



PARAMJIT SHARMA

Re- apportionment Basis

Purchase

Department

Stores

No of Purchase Orders or value of Materials

Purchased for each Production Department

•Value or Quantity of Materials Issued

•No. Of Materials Requisitions



PARAMJIT SHARMA


Internal Transport

inspection Inspection Hrs. Devoted to each

Department

Weight & Distance



PARAMJIT SHARMA


Time Keeping,

Security

CanteenWelfare

Recreation

Medical

PersonnelPay Roll

•Number Of Employees•Total Labour Hours or •Wages or Salaries



PARAMJIT SHARMA


Maintenance

Department

Factory

OfficeNo .Of Employees

Hrs. Devoted or Worked for

Each Department



PARAMJIT SHARMA


Building

Service Deptt

Boiler

House% Of Steam Utilized

Relative Area Of Each Deptt



PARAMJIT SHARMA

Interdepartmental Services

Problem

Re Apportioning costs when service departmentsprovide services to each other

Solutions

Direct Method

Step method

Reciprocal method



PARAMJIT SHARMA

Direct Method

Service

Department

(Cafeteria)

Service

Department(Custodial)

Operating

Department

(Machining)

Operating

Department(Assembly)

Interactions

between service

departments are

ignored and allcosts are

allocated directly

to operating

departments.



PARAMJIT SHARMA

Direct Method Example

Cafeteria Custodial Machining Assembly

Departmental costs

before allocation INR 360,000 INR 90,000 INR 400,000 INR 700,000

Number of employees 15 10 20 30

Square feet occupied 5,000 2,000 25,000 50,000

Service Department Apportionment Base

Cafeteria Number of employees

Custodial Square feet occupied



PARAMJIT SHARMA


Service Departments Operating Departments


Departmental costs


Cafeteria allocation ? ? ?

Custodial allocation ? ? ?

Total after allocation ? ? ? ?



PARAMJIT SHARMA

Cafeteria Custodial Machining AssemblyDepartmental costs

be fore alloca tion INR 360,000 INR 90,000 INR 400,000 INR 700,000

Cafeteria allocation (360,000) 144,000 ?


Total after allocation INR 0 ? ? ?


Apportionment base: Number of employees

INR 360,000 ×20

20 + 30 = INR 144,000



PARAMJIT SHARMA



Departmental costs


Cafeteria allocation (360,000) 144,000 216,000





INR 360,000 × 3020 + 30

= INR 216,000



PARAMJIT SHARMA



Departmental costs



Custodial allocation (90,000) 30,000 ?

Total after allocation INR 0 INR 0 INR I74,000) ?


INR 90,000 × 25,00025,000 + 50,000 = INR 30,000

Apportionment base: Square feet occupied



PARAMJIT SHARMA


Departmental costs



Custodial allocation (90,000) 30,000 60,000

Total after allocation INR 0 INR 0 INR 174,000 INR 276,000



50,00025,000 + 50,000

INR 90,000 × = INR 60,000



PARAMJIT SHARMA

--25,27025,65019,780Allocated overhead Total

11,700

(-) 11,700

-

12,600

-

(-12,600

16,330

3,900

5,040

16,250

5,200

4,200

13,820

2,600

3,360

70,700

5,000

1,850

-

2,500

-

100

2,250

10,000

1,100

-

1,500

-

-

-

4,000

3,000

600

3,000

480

1,500

3,750

3,000

3,000

500

2,500

400

1,600

5,250

3,000

2,000

400

3,000

320

600

4,500

25,000

10,950

1,500

12,500

1,200

3,800

15,750

Actual

Actual

Direct wages

(4:5:6)

No.of employees

(6:5:6:3:5)

Direct Wages

(4:5:6)

H.P. of machine

X

Machine hours

worked

(6:16:15:1)

15% of value of

machinery

Machine hours

(2:4:3)

Direct wages

(4:5:6)

Indirect wages

Indirect materials

General overhead

Amenities to staff

Employer’s

contribution to E.S.I.

Power

Depreciation

Apportionment of

workshop overhead

Apportionment of

office overhead

WorkshopOfficeP3

P2

P1

Service DepartmentProduction DepartmentTotal

(Rs.)

BasisItems

Overhead Analysis Sheet

Bharat Engineering Works Departmental



PARAMJIT SHARMA

Overhead Distribution Statement (For 12 Months)

Service

Dept.

4.2034.9758.5375Labour hour rate (A ÷ B)

9,6004,8003,200

Nil40,35023,88027,320Allocated overhead total (A)

Effective labour hours (see workings)

(No. of worker x working hours) (B)

Re-distribution of expenses of service

department to the production departments onthe basis of service rendered 30%: 20%:50%

19,900

-19,900

30,400

+9,950

19,900

+3,980

21,350

+5,970

91,550

6,000

2,000

800

1,100

1,000

1,000

8,000

13,500

1,500

1,800

8,800

1,800

3,000

---

7,500

1,500

1,400

6,600

1,400

1,500

---

9,000

3,250

1,200

5,500

1,400

1,000

---

36,000

8,250

5,200

22,000

5,600

6,500

8,000

Floor space

(30:25:45:20)

H.P. of machine

(65:30:30:40)

Direct Wages

(12:14:18:8)

Value of machine

(50:60:80:10)

Light points(7:7:9:5)

No. of workers

(2:3:6:2)

Actual

Rent

Power

Indirect wages

Depreciation of

machinery

Electricity

Canteen

expenses

Direct wages

SCBA

Production Deptts.Total

Rs.

Basis of

DistributionParticulars of

Expenses



PARAMJIT SHARMA

Operating

Department

(Machining)

Operating


Step Method

Once a service

department’s costs

are apportioned,other service

department costs

are not allocated

back to it.

Service

Department

(Cafeteria)

Service




PARAMJIT SHARMA

Step Method

Service

Department

(Cafeteria)

Service


Operating

Department

(Machining)

Operating


Custodial will

have a new

total to Apportionto operating

departments; its

own costs plus

those costs

allocated fromthe cafeteria.

Step Method



PARAMJIT SHARMA

Step Method

1 Identify the SD which renders service to larger No’s of other Deptts

2 Distribute its Costs to other Deptts , Including service Department

3 Identify the next service Department. Which renders service to thenext largest No’s

4 Continue the process till Amount is Exhausted

5 If all SD renders service to = No of Departments. Than cost of SD

with largest amount be taken first



PARAMJIT SHARMA

Step Method Example


Departmental costs

before allocation INR 360,000 INR 90,000 INR 400,000 INR 700,000Number of employees 15 10 20 30

Square feet occupied 5,000 2,000 25,000 50,000

Service Department Apportionment Base

Cafeteria Number of employees

Custodial Square feet occupied

We will use the same data usedin the direct method example.



PARAMJIT SHARMA

Step Method Example



Departmental costs


Cafeteria allocation ? ? ? ?


Total after allocation ? ? ? ?

Apportion Cafeteria costs first since

it provides more service than Custodial.



PARAMJIT SHARMA



Departmental costs


Cafeteria allocation (360,000) 60,000 ? ?



Step Method Example

INR 360,000 ×10

10 + 20 + 30= INR 60,000




PARAMJIT SHARMA



Departmental costs


Cafeteria allocation (360,000) 60,000 120,000 ?



Step Method Example

INR 360,000 × 2010 + 20 + 30

= INR 120,000




PARAMJIT SHARMA



Departmental costs


Cafeteria allocation (360,000) 60,000 120,000 180,000



Step Method Example

INR 360,000 × 3010 + 20 + 30

= INR 180,000




PARAMJIT SHARMA



Departmental costs



Custodial allocation (150,000) ? ?

Total after allocation INR 0 INR 0 ? ?

Step Method Example

New total = INR 90,000 original custodial cost

plus INR 60,000 apportioned from the cafeteria.



PARAMJIT SHARMA



Departmental costs



Custodial allocation (150,000) 50,000 ?

Total after allocation INR 0 INR 0 INR 170,000 ?

Step Method Example

INR 150,000 × 25,00025,000 + 50,000

= INR 50,000




PARAMJIT SHARMA

Step Method Example



Departmental costs



Custodial allocation (150,000) 50,000 100,000

Total after allocation INR 0 INR 0 INR 170,000 INR 280,000

INR 150,000 × 50,00025,000 + 50,000

= INR 100,000




PARAMJIT SHARMA

Comparison of Methods

Totals after allocation

Machining Assembly

Method Department Department

Direct INR 574000 INR 976000

Step 570,000 980,000

Reciprocal Results are similar to step method

SECONDARY OVERHEAD DISTRIBUTION SUMMARY



PARAMJIT SHARMA

1,60,0001,35,0003,00,0005,95,000Total

OHEs of

prod.depts

83,000

8,500

16,000

28,500

24,000

64,000

12,500

12,000

28,500

18,000

1,93,000

10,000

16,000

57,000

24,000

30,000

5,000

12,000

19,000

-66,000

1,05,000

4,000

24,000

-1,33,000

75,000

5,000

-80,000

45,000

-45,000

Given

No. of

Employees

(50:40:50:

100:125:85)

DLHs

Rs.80,000 in

(6:3:4:3:4)

Area

(Rs.1,33,000

in

(10:30:15:

15)

DLHs

(Rs.66,000

in 4:3:4)

5,95,000

0

0

0

0

Factory

overhead

Add :

Service

Dept.costs

P

Q

R

S

Z YXSRQP

Production DepartmentsService Departments (Rs.)BaseTotal Rs.Particulars



PARAMJIT SHARMA

Reciprocal Services Method

Interdepartmental

services are given

full recognitionrather than partial

recognition as with

the step method.

Service

Department

(Cafeteria)

Service


Operating

Department

(Machining)

Operating


Because of its mathematical complexity,

the reciprocal method is rarely used.



PARAMJIT SHARMA

Reciprocal Services Methods

Trial & Error

Method

Repeated

Distribution

Method

Algebraic

Simultaneous

Equation

Method



PARAMJIT SHARMA


Trial & Error

Method

Cost Of one Service Dept (Say A ) is apportioned

To another Service Dept (Say B) based on service rendered

The cost of another dept (B) plus its shareIn the cost of first service department (A)

Is again apportioned to first service department

The amount so apportioned to A will again be apportioned

to the service department B

The process continues till amount becomes negligible



PARAMJIT SHARMA

Service Departments (Rs)

X Y

Calculation Of Total Costs Of Service Departments

Total Exp as per Primary Distribution 23,400 30,000

Charge 10% 0f Rs 23,400 (X) to Y 2,340

20% of Rs.32,340 (Y) to X 6,468

10% of Rs.6,468 (X) to Y 647

20% of Rs.647 (Y) to X 129

10% of Rs.129 (X) to Y 13

20% of Rs.12 (Y) to X 3(Since Rs.3 to be apportioned is very small

distribution process is stopped )

30,000 33,000Total

Secondary Overhead Distribution Summary



PARAMJIT SHARMA


2,53,40065,60088,60099,200Total

2,00,000

27,000

26,400

50,000

9,000

6,600

70,000

12,000

6,600

80,000

6,000

13,200

Total expenses as per primary

overhead distribution

summary

Add Service Dept. Costs :

X : Rs.30,000 at 20%, 40%

& 30% to A,B, and C

Y : Rs.33,000 at 40%, 20%

& 20% to A, B & C

CBA

Total Rs.Production Departments

(Rs.)Particulars




PARAMJIT SHARMA

Reciprocal Services MethodsRepeated

Distribution

Method

1 Distribute the cost of a service Dept . to the Production

and service department Using the percentage

2 Apportion the cost of 2nd service department (Aggregate)

to production and other service department as per % given

3 Use the same procedure with other service departmentstill the cost of service departments become negligible



PARAMJIT SHARMA

QuestionA factory is having 3 prod . Departments A,B & C, and 2 service

Departments Boiler House and Pump Room. The boiler house

was to depend upon the pump Room for supply of water and in turn ,depends upon the boiler house for supply of steam power for driving

the pump The expenses incurred by the production department

during the period are: A Rs 8,00,000,B Rs 7,00,000

And C Rs 5,00,000.The expenses of Boiler house are Rs 2,34,000

and the Pump House Rs 3,00,000.The expenses of Boiler Houseand Pump house are Apportioned to the prod. departments

on the following basis

A B C BH PR

Expenses Of Boiler House 20% 40% 30% - 10%

Expenses Of Pump Room 40% 20% 20% 20% -




PARAMJIT SHARMA

Particulars Total

Rs

BasisProd Departments (Rs) Service Dept (Rs)

A B C Boiler Pump

P Distribution 25,34,000 given 8,00,000 7,00,000 5,00,000 2,34,000 3,00,00

Add Service Dept. Costs

Boiler House 0 20:40:30:10 46,000 93,600 70,200 -2,34,000 23,400

Pump Room 0 40:20:20:20 1,29,360 64,680 6 4,680 64,680 -3,23,40

Boiler House 0 20:40:30:10 12,936 5,872 19,404 -64,680 6,468

Pump Room 0 40:20:20:20 2,587 1,294 1,294 1,293 -6,46

Boiler House 0 20::40:30:20 259 517 388 -1293 129

Pump House 0 40:20:30:20 52 26 26 25 -129

Boiler House 0 20:40:20:20 5 10 8 -25 2

Pump House 0 40:20:20:20 1 1 0 0 -2

Total 25,34,000 9,92,000 8,86,000 6,56,000 0 0



PARAMJIT SHARMA


AlgebraicSimultaneous

Equation

Method •Total Costs of Service Departments are

Expressed in algebraic equation

•Equations are developed on the basis of

Primary distribution & % of service rendered

to each other

•Total Costs of Service Departments can

Be calculated by solving EQUATIONS



PARAMJIT SHARMA

Algebraic Equation

X= OHE’s + % of Y

Y= OHE’s + % of X

Service Department OHE’S can be apportioned

M N P R S

R 20% 30% 40% - 10%

S 30% 40% 10% 20% -



PARAMJIT SHARMA

Quick Check Data


ADMIN BACS Accounting Others

Departmental costs

before allocation Rs 1,80,000 Rs 90,000 Rs 1,90,000 Rs 9,00,000


Number of PCs 12 20 18 102

Allocation bases:

Business school administration costs (ADMIN):Number of employees

Business administration computer services(BACS): Number of personal computers

The direct method of Apportionment is used.



PARAMJIT SHARMA

Quick Check

How much cost will be apportioned fromAdministration to Accounting?

a. INR 36,000

b. INR144,000c. INR180,000

d. INR 27,000



PARAMJIT SHARMA

How much cost will be apportioned from Administration to Accounting?

a. INR 36,000

b. INR144,000c. INR180,000

d. INR 27,000

Quick Check


Departmental costs


ADMIN allocation 180,000 36,000 144,000


Departmental costs




Departmental costs



INR180,000X20

20 + 80= INR 36,000



PARAMJIT SHARMA

Quick Check

How much total cost will be apportioned

from ADMIN and BACS combined to the

Accounting Department?

a. INR 52,500

b. INR135,000

c. INR 270,000

d. INR 49,500



PARAMJIT SHARMA

Quick Check

How much total cost will be apportioned from

ADMIN and BACS combined to the Accounting

Department?

a. INR 52,500

b. INR 135,000

c. INR 270,000

d. INR 49,500



epartmental costsbefore allocation INR 180,000 INR 90,000 INR 190,000 INR 900,000

DMIN allocation 180,000 - 36,000 144,000

ACS allocation - 90,000 13,500 76,000

tal after allocation - - INR 239,000 INR 1,120,500

INR 90,000 ×18

18 + 102= INR 13,500



PARAMJIT SHARMA

Quick Check Data



Departmental costs



Number of PCs 12 20 18 102

Apportionment bases:

Business school administration costs (ADMIN):Number of employees

Business administration computer services(BACS): Number of personal computers

The step method of apportionment is used.



PARAMJIT SHARMA

Quick Check

How much total cost will be apportionedfrom ADMIN and BACS combined to the

Accounting Department?

a. INR 35,250b. INR 49,072

c. INR 18,000

d. INR 26,333



PARAMJIT SHARMA

Quick Check

How much total cost will be apportioned from ADMINand BACS combined to the Accounting Department?

a. INR 35,250

b. INR 49,072

c. INR 18,000

d. INR 26,333Service Departments Operating Departments


Departmental costsbefore a lloca tion INR 180,000 INR 90,000 INR 190,000 INR 900,000

ADMIN allocation (180,000) 8,571 34,286 137,143

BACS allocation - 98,571 14,786 83,786

Total after allocation INR - INR - INR 239,071 INR 1,120,929



PARAMJIT SHARMA

Overhead Appropriation

Few Questions



PARAMJIT SHARMA

4. SECONDARY DISTRIBUTION SUMMARY

31,70023,30025,80080,800Allocated overhead Total

25,000

400

500

1,500

1,500

800

2,000

18,000

500

400

1,000

900

1,000

1,500

20,000

600

300

1,500

1,200

1,200

1,000

63,000

1,500

1,200

4,000

3,600

3,000

4,500

---

No. of employee

(6:5:4)

No. of light points

(3:4:5)

House Power (3:2:3)

No. of requisitions

(4:3:5)

No. of employee

(6:5:4)

Value of assets

(2:3:4)

primary distribution

Canteen

Power house (light)

Power house (power)

Stores

Time keeping &

accounts

Repair shop

P3P2P1

Production DepartmentTotal

Rs.

Basis of

apportionment

Cost of service

department

1. Overhead Analysis Sheet



PARAMJIT SHARMA

--25,27025,65019,780Allocated overhead Total

11,700

(-) 11,700

-

12,600

-

(-) 12,600

16,330

3,900

5,040

16,250

5,200

4,200

13,820

2,600

3,360

70,700

5,0001,850

-

2,500

-

100

2,250

10,0001,100

-

1,500

-

-

-

4,0003,000

600

3,000

480

1,500

3,750

3,0003,000

500

2,500

400

1,600

5,250

3,0002,000

400

3,000

320

600

4,500

25,00010,950

1,500

12,500

1,200

3,800

15,750

ActualActual

Direct wages

(4:5:6)

No.of employees

(6:5:6:3:5)

Direct Wages

(4:5:6)

H.P. of machineX

Machine hours

worked

(6:16:15:1)

15% of value of

machinery

Machine hours

(2:4:3)

Direct wages

(4:5:6)

Indirect wagesIndirect materials

General overhead

Amenities to staff

Employer’s

contribution to E.S.I.

Power

Depreciation

Apportionment of

workshop overhead

Apportionment of

office overhead

WorkshopOfficeP3

P2

P1

Service DepartmentProduction DepartmentTotal

(Rs.)

BasisItems

2. OVERHEAD ANALYSIS SHEET

Service Deptt( Rs).Production Deptt .(Rs)TotalBasisItems



PARAMJIT SHARMA

5.802.202.50Overhead rate per working hour [(A) ÷(B)]

NilNil8,700

1,500

6,600

3,000

6,400

2,560

21,700

1,000

-

(-) 1,000

3,200

(-) 3,200

-

7,000

1,200

500

5,500

800

300

5,000

1,200

200

21,700

250

50

39

-

200

195

266

1,000

100

300

100

200

1,500

-

1,500

200

600

500

4,000

-

200

1,250

150

400

300

3,200

-

200

1,000

100

600

600

2,400

-

300

5,000

600

1,939

1,500

10,000

1,695

966

Floor space

(4:5:6:4:1)

Light points

(2:3:4:2:1)Direct wages

(600:400:600:300:39)

H.P. of Machine

(6:5:5:1)

Value of machines

(12:16:20:1:1)

Actual

Actual

Direct wages

(3:2:3)Given

(2:3:5)

Total (A)

Working hours (B)

Rent and rates

General lighting

Indirect wages

Power

Depreciation

Direct wages

Indirect materials

Apportionment of

Service

Departments

Overhead

S1

S2

S2

S1

P3

P2

P1

p ( )Production Deptt .(Rs)(Rs.)

Items



PARAMJIT SHARMA

118.40

10.00

11.00

17.40

80.00

38.40

50.0030.00

Direct materialDirect Labour

Prime Cost

Factory Overhead :

P1

: 4 x 2.50

P2

: 5 x 2.20

P3 : 3 x 5.80Cost of Product X

COST OF PRODUCT – X ( Rs)

3. SECONDARY OVERHEAD DISTRIBUTION SUMMARY

Production DepartmentsService Departments (Rs.)BaseTotal Rs.Particulars



PARAMJIT SHARMA

1,60,0001,35,0003,00,0005,95,000Total

OHEs of

prod.depts

83,000

8,500

16,000

28,500

24,000

64,000

12,500

12,000

28,500

18,000

1,93,000

10,000

16,000

57,000

24,000

30,000

5,000

12,000

19,000

-66,000

1,05,000

4,000

24,000

-1,33,000

75,000

5,000

-80,000

45,000

-45,000

Given

No. of

Employees

(50:40:50:

100:125:85)

DLHs

Rs.80,000 in

(6:3:4:3:4)

Area

(Rs.1,33,000

in

(10:30:15:

15)

DLHs

(Rs.66,000

in 4:3:4)

5,95,000

0

0

0

0

Factory

overhead

Add :

Service

Dept.costs

P

Q

R

S

Z YXSRQP

pp ( )

5 OVERHEAD DISTRIBUTION STATEMENT



PARAMJIT SHARMA

5. OVERHEAD DISTRIBUTION STATEMENT

NilNil38,17960,821Allocated overhead

14,042

-14,042

Nil

---

31,158

+7,021

53,800

+7,021

Re-distribution of expenses of Deptt. A among X,

Y and B in ratio 3:2:1

Re-distribution of expenses of Dept. B between

X and Y equally

10,325

+3,717

22,300

-22,300

23,725

+7,433

42,650

+11,150

99,000

2,000

3,000

625

500

600

600

3000

---

6,000

1,500

2,500

1,500

1,200

600

5,000

4,000

10,000

6,000

3,125

2,500

1,200

900

---

---

20,000

7,500

6,250

5,000

2,400

1,500

---

---

38,000

18,000

12,500

9,500

5,400

3,600

8,000

4,000

Assets value

(10:5:3:1)

Floor space

(5:4:1:2)

H.P. of machine

(10:5:4:1)

Assets value

(10:5:3:1)No. of workers

(100:50:50:25)

Light points

(25:15;10:10)

Actual

Actual

Depreciation

Rent, Rates & Taxes

Power

Ins.on assets

Canteen exp.

Electricity

Direct wages

Direct material

BA YX

Service Deptts.Production Deptts.Total Rs.Basis of

Apportionment

Particulars of

Expenses

7. STATEMENT SHOWING OVERHEAD EXPENSES OF PRODUCTION

DEPARTMENTS A AND B



PARAMJIT SHARMA

DEPARTMENTS A AND B

NilNil49,1101,09,290Allocated overhead total

28,900

(-)28,900

Nil

---

46,220

2,890

83,280

26,010

+12,000(-) 34,300+8,920+13,380Re-distribution of expenses of service department‘C’ Rs. 12,000 to D and balance of Rs. 22,300 to

A:B= 3:2

Re-distribution of expenses of service

Department “D” to A:B = 9:1

16,90034,30037,30069,9001,58,400

2,000

5,000

5,000

3,000

400

500

600

400

3,000

10,000

15,000

1,500

1,200

2,000

1,200

400

---

---

25,000

6,000

2,000

2,500

1,200

600

---

---

50,000

7,500

4,000

5,000

2,400

1,000

5,000

15,000

95,000

18,000

7,600

10,000

5,400

2,400

Actual

Actual

Value of Assets

(10:5:3:1)

Floor space

(5:4:1:2)

Value of Assets

(10:5:3:1)H.P. of machine

(10:5:4:1)

No. of workers

(100:50:50:25)

Light points

(25:15;10:10)

Direct material

Direct labour

Depreciation

Rent,Rates & Tax

Insurance

Power

Canteen exp.

Electricity

DCBA

Service Deptts.Production Deptts.Total Rs.Basis of

Apportionment

Particulars of

Expenses



t h a n k s

3901846 overhead distribution

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