Pita Bread Ltd has two production departments, Assembly and Finishing, and two service departments, Stores and Maintenance. The company has budgeted the following costs for the forthcoming period. Assembly Finishing Stores Maintain Allocation Indirect Material 15,250 13,500 12,650 14,000 Allocation Indirect Labour 10,250 5,600 5,520 7,500 Overheads Depreciation of equipment 58,000 Plant insurance 88,000 Heat and light 75,000 Canteen costs 24,000 Rent 50,000 Supervision 80,000 The following information is also available: Assembly Finishing Stores Maintain Total Floor Area sm 10,000 10,000 2,500 2,500 Employees 40 20 10 10 Plant book value $100,000 $100,000 $40,000 $50,000 Depreciation per annum 30% 30% 20% 20% Machine Hours 60,000 40,000 - - Stores Requisition $200,000 $300,000 - - Overheads are absorbed in both production departments on a Machine Hour basis. Required: (a) Prepare an overhead analysis sheet for the period, using suitable bases of apportionment. (b) Calculate the absorption rates for each department.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Pita Bread Ltd has two production departments, Assembly and Finishing, and two service departments, Stores and Maintenance.
The company has budgeted the following costs for the forthcoming period.
|
|
Assembly |
Finishing |
Stores |
Maintain |
|
Allocation Indirect Material |
15,250 |
13,500 |
12,650 |
14,000 |
|
Allocation Indirect Labour |
10,250 |
5,600 |
5,520 |
7,500 |
|
|
|
|
|
58,000 |
|
Plant insurance |
88,000 |
|
Heat and light |
75,000 |
|
Canteen costs |
24,000 |
|
Rent |
50,000 |
|
Supervision |
80,000 |
|
|
|
The following information is also available:
|
|
Assembly |
Finishing |
Stores |
Maintain |
Total |
|
Floor Area sm |
10,000 |
10,000 |
2,500 |
2,500 |
|
|
Employees |
40 |
20 |
10 |
10 |
|
|
Plant book value |
$100,000 |
$100,000 |
$40,000 |
$50,000 |
|
|
Depreciation per annum |
30% |
30% |
20% |
20% |
|
|
Machine Hours |
60,000 |
40,000 |
- |
- |
|
|
Stores Requisition |
$200,000 |
$300,000 |
- |
- |
|
|
|
|
|
|
|
|
Overheads are absorbed in both production departments on a Machine Hour basis.
Required:
(a) Prepare an overhead analysis sheet for the period, using suitable bases of apportionment.
(b) Calculate the absorption rates for each department.
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