Question 2
Sea Bhd manufactures three types of scuba diving equipment known as Coral, Wave and Reef. Each product is started in the Machining Department and completed in the Finishing Department. It also has a service department, Canteen.
Shown below are next year’s budgeting production data and manufacturing costs for the company.
Budgered overhead Total Machining Dept Finishing Dept Canteen
Allocated overheads RM67500 RM30000 RM25000 RM12500
Depreciation of equipment 18,000
Insurance on equipment 10,000
Rent & rates 9,000
Electricity 12,000
Additional information:
Total Machining Dept Finishing Dept Canteen
Book value of equipment RM180,000 RM120,000 RM45000 RM15000
Floor space occupied 7,800 3,600 2,400 1,800
No. of employees 19 8 6 5
Machine hours 36,900 36,900 – –
Direct labour costs RM1,110,000 RM694,000 RM416,000 –
Additional information made available includes:
Coral wave Reef
Production – units 2500 1800 1000
Prime cost, per unit:
Direct material (RM) 200 240 320
Direct labour:
Machining Dept(RM) 100 130 210
Finishing Dept(RM) 80 70 90
Machine hour(per unit) 5 8 10
In the Machining Dept
You are required to:
c) Complete the overhead analysis sheet
d) Calculate the following budgeted overhead absorption rates:
a. machine hour rate for the Machining Dept
b. a rate expressed as a percentage of direct wages for the Finishing Dept
e) Calculate the production cost/manufacturing cost of one unit of Coral, using the absorption rates as calculated in part II above.