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Green Co. has three production departments Fern, Forest, and Moss and one service department Shade. Green Co. is preparing its annual budget for the final quarter of 2021. Planned overhead costs for the quarter are as follows: Overheads Allocated overheads 40,500 Supervision Plant Depreciation 14,400 20,000 6,000 Machine Insurance Rates and Rent 46,000 The following information is available for each department: Departmental details Fern Forest Moss Shade Allocated overhead 11,000 16,500 9,500 3,500 Machine Value (£) Budgeted Direct Labour hours Floor Area Occupied (Sq.metres) Number of employees Plant at cost (£000) 5,000 2,500 3,500 1,500 1,200 600 1,800 3,000 800 1000 200 700 400 40 80 1,845 852 61 142 Of the total overhead costs allocated to the service department Shade, 20% is charged to Forest and the remainder is charged equally to the other two production department. a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly. b) Allocate the services department Shade's costs to all production departments. c) costs can have on decisions that the management of a company must make regarding the pricing of their products. Critically discuss the issues that fixed, variable and semi-variable Note: You must use the relevant academic literature and relevant practical examples or case studies to answer this question and include references appropriately as an evidence of your wider reading and research.

Green Co. has three production departments Fern, Forest, and Moss and one service department Shade. Green Co. is preparing its annual budget for the final quarter of 2021. Planned overhead costs for the quarter are as follows: Overheads Allocated overheads 40,500 Supervision Plant Depreciation 14,400 20,000 6,000 Machine Insurance Rates and Rent 46,000 The following information is available for each department: Departmental details Fern Forest Moss Shade Allocated overhead 11,000 16,500 9,500 3,500 Machine Value (£) Budgeted Direct Labour hours Floor Area Occupied (Sq.metres) Number of employees Plant at cost (£000) 5,000 2,500 3,500 1,500 1,200 600 1,800 3,000 800 1000 200 700 400 40 80 1,845 852 61 142 Of the total overhead costs allocated to the service department Shade, 20% is charged to Forest and the remainder is charged equally to the other two production department. a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly. b) Allocate the services department Shade's costs to all production departments. c) costs can have on decisions that the management of a company must make regarding the pricing of their products. Critically discuss the issues that fixed, variable and semi-variable Note: You must use the relevant academic literature and relevant practical examples or case studies to answer this question and include references appropriately as an evidence of your wider reading and research.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 14E
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Question 1 Green Co. has three production departments Fern, Forest, and Moss and one service department Shade. Green Co. is preparing its annual budget for the final quarter of 2021. Planned overhead costs for the quarter are as follows: Overheads Allocated overheads 40,500 Supervision Plant Depreciation 14,400 20,000 6,000 46,000 Machine Insurance Rates and Rent The following information is available for each department: Departmental details Fern Forest Moss Shade Allocated overhead 11,000 16,500 2,500 9,500 3,500 3,500 1,500 Machine Value (£) Budgeted Direct Labour hours Floor Area Occupied (Sq.metres) Number of employees Plant at cost (£000) 5,000 1,200 600 1,800 1000 3,000 800 200 700 400 40 80 1,845 852 61 142 Of the total overhead costs allocated to the service department Shade, 20% is charged to Forest and the remainder is charged equally to the other two production department. a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly. b) Allocate the services department Shade's costs to all production departments. c) Critically discuss the issues that fixed, variable and semi-variable costs can have on decisions that the management of a company must make regarding the pricing of their products. Note: You must use the relevant academic literature and relevant practical examples or case studies to answer this question and include references appropriately as an evidence of your wider reading and research.
Transcribed Image Text:Question 1 Green Co. has three production departments Fern, Forest, and Moss and one service department Shade. Green Co. is preparing its annual budget for the final quarter of 2021. Planned overhead costs for the quarter are as follows: Overheads Allocated overheads 40,500 Supervision Plant Depreciation 14,400 20,000 6,000 46,000 Machine Insurance Rates and Rent The following information is available for each department: Departmental details Fern Forest Moss Shade Allocated overhead 11,000 16,500 2,500 9,500 3,500 3,500 1,500 Machine Value (£) Budgeted Direct Labour hours Floor Area Occupied (Sq.metres) Number of employees Plant at cost (£000) 5,000 1,200 600 1,800 1000 3,000 800 200 700 400 40 80 1,845 852 61 142 Of the total overhead costs allocated to the service department Shade, 20% is charged to Forest and the remainder is charged equally to the other two production department. a) Prepare an overhead analysis sheet showing the total overhead cost budgeted for all four departments. You must show all your workings clearly. b) Allocate the services department Shade's costs to all production departments. c) Critically discuss the issues that fixed, variable and semi-variable costs can have on decisions that the management of a company must make regarding the pricing of their products. Note: You must use the relevant academic literature and relevant practical examples or case studies to answer this question and include references appropriately as an evidence of your wider reading and research.
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