A&b QUESTION 1 [25] FIFO Limited has gathered the following information: Dept A R600 000 Dept...

Answer:

This is the Primary allocation of overhead

Note : Cost per cost driver unit = Total cost/ total Cost driver

For secondary allocation, Machine hours are basis.

So we allocate, servuy department costs to production department based on machine hours

For Production Dept A = (Total costs / Total machine hours of A & B) x Machine hours of A

= (41,047/13,000) x 5,000

= 15,787

For production department B = (41,047/13,000) x 8,000

= 25,260

Also, Calculating overhead allocation rate for department A based on material usage

Dept A = (Total Cost / Total Materials)

= (188,107+15,787) / 200,000

= (203,894) / 200,000

= 101.947% of material cost or 1.01947

Dept B = (Total Cost / Total Materials)

= (118,846+25,260) / 8,000

= (144,106) / 8000

= 18.013 per machine hour