Darnick Holdalls Ltd., manufacture three types of high quality hand made cases, small, medium and large. These are manufactured in two departments, the cutting department and the stitching department. There are also two service departments, maintenance and canteen. The estimated data for the year ending 31 December 2004 is as follows. ........ (see attchment)
a) Use the grid below to prepare an overhead analysis sheet for the year ending 31 December 2004, detailing overheads for cutting and stitching departments. Canteen costs are shared among all the other departments on the basis of number of employees. Maintenance costs are shared between the production departments on the basis of 70% to stitching and 30% tocutting.
Overheads Cutting Stitching Maintenance Canteen Total
(b) Calculate the overhead recovery rate for
(i) the cutting department, based on direct wages;
(ii) The stitching department, based on machine hours.
(c) Give reasons for the two different methods used in (b)
This solution prepares an overhead analysis sheet and calculates the overhead recovery rate for the cutting department, based on direct wages and the stitching department, based on machine hours.