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

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A&b

QUESTION 1 [25] FIFO Limited has gathered the following information: Dept A R600 000 Dept B R300 000 Dept C R150 000 R200 000 R150 000 1 200 2 000 400 Value of machinery Material usage Floor area (m²) Number of employees Machine hours Kilowatt-hours 500 300 100 1 000 8 000 5 000 9 000 7 000 2 000 Departments A and B are production departments, and department C is a service department. Machine hours are used as a basis for the secondary allocation. The following expenses were incurred during the first production year. Insurance on buildings R120 000 Depreciation of machinery R75 000 Cafeteria costs R37 500 Water and electricity R115 500 Required: a) Allocate the overheads to the different departments. Show both the primary as well as the secondary allocation of the overheads. (20) b) Calculate the overhead allocation rates for Department A based on material usage, and for Department B, based on machine hours. (5)

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