Question Two: Ancestors Company has two departments, A and B, engaged in manufacturing operations and they are serviced by stores, maintenance department, and a tool room. The following information has been budgeted for the next financial period:
Total overhead: Shs 000
Indirect labor: 1,837
Supervision: 140
Power: 160
Rent: 280
Rates: 112
Plant insurance: 40
Plant Depreciation: 20
2,589
Additional information:
A B shs 000 shs 000
620 846
Stores: Shs.000
149
Maintenance: Shs 000
115
Tool room: Shs. 000
107
A:
1,000
30
60
5,000
8,000
50
B:
8
2,500
50
30
6,000
9,000
40
Stores:
Maintenance:
1,100
600
10
20
15
0
2,000
0
0
0
5
Tool room:
400
30
12
3,000
6,000
5
Floor area (square meters)
Number of employees
Power (000 kilowatts hours)
Number of material requisition maintenance hours
Plant valuation (shs 000)
Tool room hours (000 estimated)
Machine hours (000 estimated)
Required:
a) Apportionment of the overhead costs to the various cost centers (12 Marks)
b) XYZ Ltd stocks and sales a product branded "NECK". The following information relates to NECK.
Kshs. 900
5,000
17
20
Cost per unit
Insurance costs: Fixed
Per unit of average inventory
Taxes (Per unit of average inventory)
Additional information:
i) The company's average sales amount to 1,500 units per annum.
ii) The processing costs amount to sh.100 per order.
iii) The purchasing department pays annual fixed salaries of sh. 6,000,000 plus shs.500 per order.
iv) The required rate of return on investment is equivalent to 15% of the purchase cost.
v) The company pays shs.900 for offloading for each delivery.
Required:
Determine the economic order quantity (EOQ) for the company. (6 Marks)
