A factory has two Production Departments—A and B and two Service Departments—X and Y. Following costs have been incurred: Supervision 6,000, Repairs to Plant and Machinery 2,400, L... A factory has two Production Departments—A and B and two Service Departments—X and Y. Following costs have been incurred: Supervision 6,000, Repairs to Plant and Machinery 2,400, Light 2,000, Employees contribution to ESI 400, Rent 1,600, Depreciation to Plant and Machinery 4,000, Power 2,000, Canteen Expenses 200. Apportion the overhead of Service Department—Y and X in the ratio of 1 : 1 the Production Department.
Understand the Problem
The question presents a scenario involving a factory with two production departments and two service departments, along with various cost details. It asks for the apportionment of the overhead of service departments Y and X in a specific ratio. To solve it, we will need to analyze the given data and apply the appropriate cost allocation methods.
Answer
The apportioned overhead for each service department X and Y is ₹9,300.
Answer for screen readers
The apportioned overhead for each service department X and Y is ₹9,300.
Steps to Solve
- Identify Total Overhead Costs for Service Departments
First, we need to sum up the overhead costs for the service departments X and Y. The costs are as follows:
- Supervision: ₹6,000
- Repairs to Plant and Machinery: ₹2,400
- Light: ₹2,000
- Employees contribution to ESI: ₹400
- Rent: ₹1,600
- Depreciation to Plant and Machinery: ₹4,000
- Power: ₹2,000
- Canteen Expenses: ₹200
Total overhead costs = ₹6,000 + ₹2,400 + ₹2,000 + ₹400 + ₹1,600 + ₹4,000 + ₹2,000 + ₹200 = ₹18,600
- Determine the Apportionment Ratio
The problem states that the overhead should be apportioned between service departments Y and X in the ratio of 1:1.
- Calculate Apportioned Overheads
Since the total overheads of ₹18,600 need to be split equally, we can calculate the apportioned amount for each department.
[ \text{Amount for X} = \text{Amount for Y} = \frac{Total , Overhead}{2} = \frac{₹18,600}{2} = ₹9,300 ]
- Final Verification of Apportioned Amounts
We should verify that our total apportionment adds up correctly:
[ \text{Total Apportioned} = \text{Amount for X} + \text{Amount for Y} = ₹9,300 + ₹9,300 = ₹18,600 ]
This confirms that our calculations are correct.
The apportioned overhead for each service department X and Y is ₹9,300.
More Information
The overhead apportionment is critical in cost accounting as it ensures that all departments share in the total costs based on their usage of resources. Understanding this helps in assessing the efficiency of departments.
Tips
- Failing to sum all overhead costs correctly.
- Misinterpreting the apportionment ratio between the departments.
- Forgetting to verify the total apportioned amount after calculation.
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