Pop Quiz 4

A company uses a predetermined overhead absorption rate based on machine hours. Budgeted factory OH for a year amounted to RM720K, but actual factory OH incurred was RM738K. During the year the company absorbed RM714K of factory OH on 119K actual machine hours.

What was the company's budgeted level of machine hours for the year?

• 116,098

• 119,000

• 120,000

• 123,000

Based on the data below, what is the amount of the OH under-/over-absorbed?

Budgeted OH RM493,200

Budgeted machine hours 10,960

Actual machine hours 10,493

Actual OH RM514,157

• RM20,957 Under-absorbed

• RM21,015 over-absorbed

• RM21,015 under-absorbed

• RM41,972 under-absorbed

FrePal has established the following information regarding fixed OH for coming month:

Fixed OH RM180,000

Labour hours 3,000

Machine hours 10,000

units of production 5,000

FrePal produces many different products using highly automated manufacturing processes and absorbs OH on the most appropriate basis. What will be the predetermined OH absorption rate?

• RM16

• RM18

• RM36

• RM60

A company has over-absorbed fixed production OH for the period by RM6,000. The fixed production OH absorption rate was RM8 per unit based on the normal level activity of 5,000 units. Actual production was 4,500 units. What was the actual fixed production OH incurred for the period?

• RM30,000

• RM36,000

• RM40,000

• RM42,000

A company absorbs OH on machine hours. In a period, actual machine hours were 17,285, actual OH were RM496,500 and there was under-absorption of RM12,520. What was the budgeted level of OH?

• RM483,980

• RM496,500

• RM509,020

• It cannot be calculated from the information provided

What is NOT an example of an overhead cost?

• Power costs

• Rent of premises

• 
  Depreciation

• Direct materials

The following are the reasons of reapportion OH cost from service to production department, EXCEPT

• Only production departments produce goods that will ultimately be sold

• 
  Service department does not incurred any cost

• To help measure profitability in operating departments

• 
  To help determine the cost base for cost-plus pricing

______ method: The service centre costs are apportioned to production departments only

Allocation of overheads takes place when the overhead cost can be identified with a particular department or is unique to a department.

• True

• False