Kowolski Ltd has 5 departments for which the following estimates have been made for May

2. Kowolski Ltd has 5 departments for which the following estimates have been made
for May.
Machining Assembly Finishing Canteen Maintenance
Apportioned £26,000 £66,400 £20,000 £16,000 £18,000
22,000 10,000 4,000 0 4,000
Direct Labour
Hours 6,000 14,000 20,000 5,000 0
Materials £100,000 £38,200 £30,000 0 £14,000
No of
employees 28 20 16 8 10
(a) (i) Re-apportion the overheads of the maintenance department based on
direct machine hours.
(ii) Re-apportion the overheads of the canteen based on number of
(b) Calculate the overhead recovery rate for each of the production departments on
the following basis:
(i) Machining – per direct machine hour;
(ii) Assembly – percentage of direct material cost;
(iii) Finishing – direct labour hours.

At the end of May the actual results for each department were:
• Machining – direct machine hours were 24,000
• Assembly – direct material cost was £35,000
• Finishing – direct labour hours were 17,500
Actual Overheads for May were:
• Machining – £43,800
• Assembly – £74,500
• Finishing – £23,800
(c) Calculate for each department the amount of overhead over or under absorbed.
The following information relates to Job 33C.
Machining Assembly Finishing
Material Cost £80 £40 £4
Direct Machine Hours 20 8 2
Direct Labour Hours 6 12 10
Labour rate (per hour) £12 £8 £8·50
Overheads ? ? ?
(d) Calculate the selling price to be charged for Job 33C if a profit margin of 20% is
(e) Explain the difference between “apportionment” and “allocation” of overheads.

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