mickuseth
Oct 18, 2009, 09:45 AM
Athena Ltd is an engineering business doing work for its customers to their particular requirements and specifications. It determines the full cost of each job taking a job costing approach, accounting for overheads on a departmental basis. It bases its prices to customers on this full cost figure. The business has two departments: a machining department, where each job starts, and a fitting department, which completes all of the jobs. Machining department overheads are charged to jobs on a machine hour’s basis and those of the fitting department on a direct labour hour basis. The budgeted information for next year is as follows:
Heating and lighting £25 000 allocated equally between the two departments
Machine power £10 000 all allocates to the machining department
Direct labour £200 000 £150 000 allocated to fitting department and £50 000 to the machine department. All direct workers are paid £10 an hour.
Indirect labour £50 000 apportioned to the departments in proportion to the direct labour cost
Direct materials £120 000 all applied to jobs in machining department
Depreciation £30 000 all relates to the machining department
Machine time 20 000 hours all worked in the machining department
Required:
a) Prepare a statement showing the budgeted overheads for next year, analysed between the two departments. This should be in the form of three columns: one for the total figure for each type of overhead and one column each for the two departments, where each type of overhead is analysed between the two departments. Each column should also show the total overhead for the year.
b) Calculate the appropriate rate for charging the overhead of each department (that is a separate rate for each department)
c) Athena Ltd has been asked by a customer to specify the price that it will charge for a particular job that will, if the job goes ahead, be undertaken early next year. The job is expected to use direct material costing Athena Ltd £ 1200, to need 50 hours of machining time, 10 hours of Machine Department direct labour and 40 hours of Fitting Department direct labour. Athena Ltd charges a profit loading of 20% to the full cost of jobs to determine the selling price.
Show workings to derive the proposed selling price for this job.
Heating and lighting £25 000 allocated equally between the two departments
Machine power £10 000 all allocates to the machining department
Direct labour £200 000 £150 000 allocated to fitting department and £50 000 to the machine department. All direct workers are paid £10 an hour.
Indirect labour £50 000 apportioned to the departments in proportion to the direct labour cost
Direct materials £120 000 all applied to jobs in machining department
Depreciation £30 000 all relates to the machining department
Machine time 20 000 hours all worked in the machining department
Required:
a) Prepare a statement showing the budgeted overheads for next year, analysed between the two departments. This should be in the form of three columns: one for the total figure for each type of overhead and one column each for the two departments, where each type of overhead is analysed between the two departments. Each column should also show the total overhead for the year.
b) Calculate the appropriate rate for charging the overhead of each department (that is a separate rate for each department)
c) Athena Ltd has been asked by a customer to specify the price that it will charge for a particular job that will, if the job goes ahead, be undertaken early next year. The job is expected to use direct material costing Athena Ltd £ 1200, to need 50 hours of machining time, 10 hours of Machine Department direct labour and 40 hours of Fitting Department direct labour. Athena Ltd charges a profit loading of 20% to the full cost of jobs to determine the selling price.
Show workings to derive the proposed selling price for this job.