Overhead allocation

MWAUGH1983

Hi All,
Just wondered if someone could advise how you work out machine value for this.

Particlarly the unit 6 osborne book on pp 122-23 where it has machine dep at 20, 000 with a split of 16,000 and 4,000 (dept x & y respectively) and also has the machine insurance.

Any advise on how to calculate this would be good.


Cheers
Martin

SandyHood

Martin
I don't have a copy of the question to look at, but in general terms there would be data in the question to show that the total NBV of machinery (or a similar description) and if you were to add them up the total would show that one fifth is in dept y and 4/5ths in dept x.
Hence the £20,000 is divided by 5 and 4/5ths (£16,000) is apportioned to dept x and 1/5th to dept y.

AliF

You may have worked this out by now but if not.

Osborne book pg 122

The split is done on the value of machinery;

dept X has machinery with value of £80,000, dept y has machinery with value of £20,000.
therefore dept x has 4/5 of the machinery, dept y has 1/5 of the machinery
dept x takes 4/5ths of the depreciation costs ie £20,000 * 4/5 = £16,000
dept y takes 1/5th of the depreciation costs ie £20,000 *1/5 = £4,000

Hope that is of help