Problem:
A company has two production departments and two service departments. The following data relates to a particular period:
|
Particulars
|
Production departments
|
Service departments
|
|
P1
|
P2
|
|
|
|
Direct material (Rs)
|
40.000
|
20,000
|
5,000
|
10,000
|
|
Direct wages (Rs)
|
47.5•0
|
25,000
|
101000
|
5,000
|
|
Overheads (Rs)
|
40,000
|
25,000
|
151000
|
10,000
|
|
Power requirement at normal capacity operations (KWH)
|
20,000
|
35,000
|
12,500
|
17,500
|
|
Actual power consumption during the period (KWH)
|
13,000
|
23,000
|
10,250
|
10,000
|
The power requirements of these departments are met by a power generation plant. The said plant incurred an expenditure, which is not included in the aforementioned information, of Rs 1,21,875 out of which a sum of Rs 84,375 was variable and the rest fixed. After apportionment of power generation plant costs to the four departments, the service department overheads must be redistributed on the following bases:
|
Department
|
P1
|
P2
|
S1
|
S2
|
|
S1
|
50%
|
40%
|
-
|
10%
|
|
S2
|
60%
|
20%
|
20%
|
-
|
You are required to perform the following:
Apportion the power generation plant costs to the four departments.
Re-apportion the costs of service departments to production departments.
Calculate the overhead rate per rate of direct labour hour of production departments, given that the direct wages rates of P1 and P2 are Rs 5 and Rs 4 per hour, respectively.