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ACCA Applied Knowledge · Management Accounting · Accounting for material, labour and overheads

Marlow Co has two production departments (P1 and P2) and one service department (Stores). Overheads after allocation are P1 $60,000, P2 $40,000 and Stores $30,000. Stores services are used 60% by P1 and 40% by P2. What is the total overhead of P2 after apportioning Stores?

P2's total overhead is $52,000. Its own allocated overhead of $40,000 is increased by 40% of the $30,000 Stores cost, which is $12,000. The mistake of using 60% would give $58,000, but P2 uses only 40% of Stores services.

  1. A$52,000Correct
  2. B$58,000
  3. C$70,000
  4. D$40,000

Explanation

Stores cost of $30,000 is shared 60:40, so P2 gets 40% x $30,000 = $12,000. P2 total = $40,000 + $12,000 = $52,000. $58,000 would result from giving P2 the 60% share.

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