Help with budgeted fixed over head workings pls

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:08AM in AAT student discussion
Hi, <BR><BR>I am currently about to re take unit 8 and am very stuck on the following. <BR><BR>June 2003 exam has a question that askes to work out the budgeted fixed over head and also the actual fixed over head. The answer says to do 720 machine hours by 1152 machine hours then x budgeted costs. <BR><BR>I assume this is to do with the two different departments and allocation of costs. In all examples in text books I cant find no sample with two different departments and the explanation of why its 720/14400 x £26000.00. I really need help please as this is holding me back.<BR><BR>Thanks<BR><BR>Qwerty

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with budgeted fixed over head workings pls

    qwerty<BR>When Mr Watts wrote the PEV/MCV exam there were several examples where budgeted and actual overheads were allocated to departments on the basis of budgeted hours.<BR><BR>Many of my students found this hard to comprehend. Even so, this is quite possible in some firms.<BR><BR>Do this: find what proportion of the budgeted total hours for the whole business are for your department. <BR>At Croxton The total budgeted machine hours are 1,152 (given in the question) and the processing department budgeted machine hours are: 16 hours per barrel x 45 budgeted barrels to be produced (720 hours) so 0.625 of the total hours are in the processing department<BR><BR>On that basis this firm requires you to allocate 0.625 of the total overhead cost (budgeted AND actual) to the processing department<BR><BR>i.e. The budgeted overhead will be £23,040 x 0.625 = £14,400<BR>and the actual overhead allocated will be £26,000 x 0.625 = £16,250<BR><BR>The key is to read the question and remember that BOTH budgeted and actual overheads are being allocated on the basis of budgeted hours.<BR><BR>sandy.hood@chichester.ac.uk<BR><BR>Sandy

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