CIMA BA2 · Chapter 3 · Question 3 of 8
The overheads of the Maintenance service cost centre total $36,000. Maintenance work is used as follows: Production department P1 60%, Production department P2 30%, Stores (a service cost centre) 10%. Using the DIRECT method, which ignores work done for other service cost centres, how much Maintenance overhead is reapportioned to P1?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $24,000
Explanation
The direct method ignores the 10% used by Stores and reapportions the whole $36,000 between the production departments in the ratio 60:30. P1 = $36,000 x 60/90 = $24,000.
More Accounting for overheads MCQs
- Q5A production department is highly automated, and most of its overhead costs relate to running its machines. Which basis is most…
- Q6Budgeted production overheads were $450,000 and budgeted direct labour hours were 60,000. Overheads are absorbed on a labour hour basis…
- Q7A company absorbs production overheads at $12 per machine hour. During the period 28,000 machine hours were worked and overheads were…
- Q8In which of the following situations would overheads DEFINITELY be under-absorbed, assuming a predetermined absorption rate based on…
- Q1What is the difference between overhead ALLOCATION and overhead APPORTIONMENT?