Overheads

1. The following data were obtained from books of ACB Ltd. Prepare a Departmental Distribution
Statement

Particulars Units P-A P-B P-C S-X S-Y

Direct wages Rs. 7000 6000 5000 1000 1000
Direct materials Rs. 3000 2500 2000 1500 1000
Employees No. 400 300 300 100 100
Electricity KWH 8000 6000 6000 2000 3000
Light points No. 10 15 15 5 5
Asset values Rs. 5000 3000 2000 1000 10000
0 0 0 0
Area occupied Sq.Yds. 800 600 600 200 200

Overheads expenses are: stores overhead 400

Power 1500
Lighting 200
Labour welfare 3000
Depreciation 6000
Repairs and maintenance 1200
General overheads 10000
Rent & taxes 600
Department S-X is apportioned in the ratio of 4:3:3 and S-Y in the ratio of direct wages to the
production departments A,B,C respectively.

2. Calculate labour Hour Rate from the following data for A,B,C:
Ashu ltd has 3 production departments A,B,C and a service department S. following details is
available for 1 month of 25 working days of 8 hours each. All departments work all days with full
attendance.

Particulars Total S A B C
Power & lighting Rs. 1100 240 200 300 360
Supervisors Salary Rs. 2000 20% 30% 30% 20%
Rent Rs. 500
Welfare Rs. 600
Others Rs. 1200 200 200 400 400
No. of employees 10 30 40 20
Floor Area in Sq. Fts 500 600 800 600
Service rendered by service dept to prod dept 50% 30% 20%

3. From the following compute machine hour rate for the month of January
Cost of machine Rs. 32000
Estimated Scrap value Rs. 2000
Effective working life 10000 hours
Repairs and maintenance expenses over the life period of machine Rs. 2500
Standing charges allocated to this machine for the month of January Rs. 400
Power consumed by machine @ Re. 0.30 per unit Rs. 600
Machine consumes 10 units of power per hour.

4. Following particulars relating to a production department of a factory –

Material used 80000/-
Direct wages 72000/-
Direct labour hours worked 20000
Hours of machine operation 25000
Overhead charges allocated to the department 90000/-
Cost data of the work executed is given:
Material used 8000/-
Direct wages 6250/-
Labour hours booked 3300
Machine hours booked 2400
What would be the factory cost of the work order under the following methods of charging
overheads: direct labour cost rate; machine hour rate and direct labour hour rate.

5. Following are the maintenance costs incurred in a machine shop for 6 months with
corresponding machine hours:

Months Machine hours Maintenance cost

Jan 2000 300
Feb 2200 320
March 1700 270
April 2400 340
May 1800 280
June 1900 290
Total 12000 1800

Analyze maintenance cost which is a semi variable expense into fixed and variable.

6. A company has 3 production departments and 2 service departments. Distribution summary is as

under:
Production Depts.
A Rs. 13600
B Rs. 14700
C Rs. 12800
Service Depts.
X Rs. 9000
Y Rs. 3000
The expenses of service departments are charged on a percentage basis which is as follows:
A B C X Y
X DEPT 40 30 20 - 10
Y DEPT 30 30 20 20 -
 Apportion cost of service department using repeated distribution method.

7. Tara Ltd has three production departments X,Y,Z and two service department A,B. following
estimated figures for a certain period have been obtained

Rent & rates 10000

Lighting & electricity 1200
Indirect Wages 3000
Power 3000
Depreciation on machinery 20000
Other expenses and sundries 20000
Following further details is available:

Particulars Total X Y X A B
Floor space (Sq. Mts) 10000 2000 2500 3000 200 500
0
Light points (no.) 120 20 30 40 20 10
Direct wages (Rs.) 20000 6000 4000 6000 300 1000
0
Horsepower of machines 300 120 60 100 20 -
Cost of machine (Rs) 10000 2400 3200 4000 200 2000
0 0 0 0 0
4670 3020 3050 - -

The expenses of service departments are to allocated as under:

X Y Z A B
A 20 30 40 - 10
B 40 20 30 10 -
YOU are required to calculate the overhead absorption rate per hour in respect of the production
department
What will be the cost of an article with material cost Rs. 80 and Direct Labour of Rs. 40 which
passes through X,Y and Z departments for 2,3 and 4 hours respectively?
 Cost Sheet

1. Prepare the Cost Sheet from the following for M/S Glory Ltd for the year ending 31-03-2008.
Particulars Amount in Rs.
Purchase of raw materials 155000
Freight paid on raw materials 4000
Productive wages paid 75000
Unproductive wages 22000
Productive wages outstanding 7000
Royalty on production (Direct) 18000
Fuel & power 4500
Factory rent 6300
Insurance on machinery 1700
Loading & unloading charges on purchase of raw materials 3500
Loss on sale of old machinery 5400
Depreciation on machinery 8300
Factory lighting 700
Lighting – office 300
Factory cleaning 400
Advertising 3700
Carriage outwards 1300
Income tax 6040
Factory telephone 890
Plant repairs and maintenance 2500
Office computer’s depreciation 12000
Office stationery 2100
Salesman traveling expenses 3500
Office staff traveling expenses 1800
Donations 1350
Salary to sales staff 7000
Marketing research expenses 1400
Bank charges and interest 340
Expenses on office cars 3500
Office managers salary 5400
Bad debts 700

2. Following information is available from the books of Tip Top Ltd:

Particulars Amount Particulars Amount

Wages – direct 75000 Factory expenses 3700
Factory wages 10000 Selling expenses 1000
Rent rates & taxes- factory 5000 Traveling expenses of salesman 1100
- office 500 Carriage and freight outwards 1000
Salary - office 1500 Sales 230000
- salesman 2000 Purchase of raw materials 7500
Indirect material 1500 Other direct charges 15000
Office expenses 900 Depreciation on plant 2500
Managing directors remuneration 12000 Depreciation on office furniture 1100
Advertisement 2000 Advance tax 15000
Commission on issue of shares 6000 Goodwill 8000
Profit on sale of capital asset 2000 Transfer to general reserve 10000

Managing director’s remuneration is to be allocated – Rs. 4000 to factory, Rs. 2000 to office, Rs.
6000 to selling department. From the above information find out:- Prime Cost, Works Cost, Cost of
Production, Cost of Sales and Net Profit.

3. The following information is received from the books of Sweety Ltd for the quarter ending
31-03-2007.
Stock on 31.3.2007- 70000/-
Stock on 1.1.2007- 100000/-
Purchase of raw materials- 803290/-
Traveling expenses- 5100/-
Carriage inwards- 4500/-
Carriage outwards- 9150/-
Drawing of office salary- 7000/-
Depreciation on plant- 8000/-
Factory rent, rates and insurance- 11200/-
Office rent, rates & insurance- 29100/-
Showroom expenses- 9000/-
Productive wages paid- 227000/-
Repairs on pant, machine and tools- 10000/-
Stationery- 11350/-
Travelers salaries and commission- 9000/-
Depreciation on office furniture- 700/-
Directors fees- 8000/-
Fuel gas & water- 17900/-
Managers salary- 18000/-
Income tax paid- 12000/-
Donations- 4600/-
Office expenses- 5000/-
Air conditioning charges- 4000/-
Labour welfare expenses-7200/-
Outstanding productive wages-33000/-
Sales -1370000/-
Prepare cost sheet giving following information, assuming manager devotes 2/3 (two third) of his
time to factory.
(1) Material used, (2) Prime Cost, (3) Works overhead and its percentage on wages,
(4) Factory cost, (5) Office cost and its % on works cost, (6) Total cost,
(7) Net profit and its % on total cost.

4. Classify the following items into factory overheads, administration overheads and selling
and distribution overheads and items excluded from cost.
Particulars Rs.
Cost of gas and water 2200
Grease and oil for machines 800
Unproductive wages 4850
Advertisement cost 3000
Directors remuneration 12000
Chargeable expenses 1200
Dividend paid 7800
Bad debts 700
Provision for bad debts 1600
Appropriation to sinking fund 3300
Factory repairs and renewals 2400
Wages for foreman 1350
Carriage inwards 670
Carriage outwards 1700
Upkeep of delivery vans 2700
Sales branch office expenses 3800
Transfer to general reserve 2600
Collection charges 1300
Mobile phone charges of salesman 2100
Traveling charges of salesman 1900
Stationery—Office 450
Stationery---Showroom 340
Income tax paid 1250
Legal charges 400
Preliminary expenses written off 850
Labour welfare expenses 2600
Warehouse rent 750
Electricity- Office 700
Electricity- Factory 1600
Electricity- Showroom 800
 Inventory management

1. From the following transactions prepare Stores Ledger Account using FIFO, LIFO, SAM,
WAM:
Year 2007
1 July Opening Stock 500 units @ Rs. 20/- each
4 July Purchased GRN 574 400 units @ Rs. 21/- each
6 July Issued SR 251 600 units
8 July Purchased GRN 578 800 units @ Rs. 24/- each
9 July Issued SR 258 500 units
13 July Issued SR 262 300 units
24 July Purchased GRN 584 500 units @ Rs. 25/- each
28 July Issued SR 269 400 units
GRN= Goods Received Notes
SR= Sales Requisition
Suppose Replacement Prices are: 6 july- 22/-, 9 july- 23/-, 13 july- 24/-, 28 july- 26/-. Prepare
Stock Register using Replacement Method.
Further, Using Stand Price method prepare stock statement if the Standard Price is Rs. 24/- per
unit.

2. Following is the record of receipts and issues of a certain material in the factory during the week:
April- 2008
1. opening 50 tonnes @ 10
1. issued 30 tonnes
2. received 60 tonnes @ 10.2
3. Issued 25 tonnes. Stock Valuation revels loss of 1 tonne
4. Received back from orders 10 tonnes. Previously issued @ 9.15
5. issued 40 tonnes
6. received 22 tonnes @ 10.3
7. issued 38 tonnes
At what price will you issue the materials? Use LIFO and FIFO methods.