CAF-5 · Chapter 17 · Question 8 of 20
(Overheads & Simultaneous Equations) Service Department X incurs initial overheads of Rs. 40,000 and receives 20% of Service Department Y's costs. Service Department Y incurs initial overheads of Rs. 30,000 and receives 10% of Service Department X's costs. Using the simultaneous equation method, what are the total overheads of Department X before final apportionment to production?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 46,939
Explanation
Equation 1: X = 40,000 + 0.2Y. Equation 2: Y = 30,000 + 0.1X. Substitute Y into Equation 1: X = 40,000 + 0.2(30,000 + 0.1X). X = 40,000 + 6,000 + 0.02X. 0.98X = 46,000. X = 46,000 / 0.98 = Rs. 46,938.77 (rounded to 46,939).
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