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2 marksOverheads and Manufacturing Accounts

CAPE Accounting Unit 2 · 2013 · Paper 2 · Question 1(a)(ii)

Tell Company has three service departments (A, B, C) and two production departments (P1, P2). Overhead costs and allocation bases (number of employees, square feet of space occupied, machine hours) are given in Table 1. Service department costs are allocated using the step-down method in the order: number of employees, space occupied, and machine hours. No distinction is made between fixed and variable costs.

Compute predetermined overhead rates for Production Department P1 and Production Department P2.

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Other parts of this question

  1. 1(a)(i)Using the provided answer sheet, prepare a schedule to allocate service department costs to production departments using the step-down method.[13 marks]
  2. 1(b)(i)In the first week, Sue worked 45 hours but was idle for 3 hours due to machine breakdowns, with no overtime. Allocate Sue's wages for the week between direct…[4 marks]
  3. 1(b)(ii)In the second week, Sue worked 60 hours with no idle time. Allocate Sue's wages for the week between direct labour cost and manufacturing overhead cost.[5 marks]
  4. 1(b)(iii)Identify two other methods of remuneration/payment that Tell Company could use for its employees.[2 marks]
  5. 1(c)(i)Use a diagram and an example to explain fixed cost.[3 marks]
  6. 1(c)(ii)Use a diagram and an example to explain variable cost.[3 marks]
  7. 1(c)(iii)Use a diagram and an example to explain stepped-fixed cost.[3 marks]

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