Deedee Tech Sdn Bhd (DTSB) involves in the production of computer appliances. There are two producing departments in DTSB: assembly, and quality control. For the purpose of overhead allocation, the assembly department applies machine hours, while quality control department uses direct labour hours. However, if the plant-wide rate is applied, DTSB would use machine hours for the cost driver. The information below is related to the overhead costs of DTSB for the year 2021: Assembly Quality Control Total Estimated overhead RM250,000 RM130,000 RM380,000 Estimated machine hour 21,000 hours 3,000 hours 24,000 hours Estimated direct labour hour 20,000 hours 80,000 hours REQUIRED: (a) Calculate the predetermined overhead rate using: (i) Plant-wide rate (ii) Multiple department rates 100,000 hours b) Based on your calculation in (a), justify which rate is more reliable. Assume that at the end of the year, the books of DTSB show: Item RM Over-applied overhead 32,000 Cost of Goods Sold 130,000 Work in Process 40,000 Finished Goods 30,000 c) Advise DTSB on how to adjust the over-applied overhead using the TWO (2) methods. (Show the journal entries to record the adjustment).
Deedee Tech Sdn Bhd (DTSB) involves in the production of computer appliances. There are two producing departments in DTSB: assembly, and quality control. For the purpose of overhead allocation, the assembly department applies machine hours, while quality control department uses direct labour hours. However, if the plant-wide rate is applied, DTSB would use machine hours for the cost driver. The information below is related to the overhead costs of DTSB for the year 2021:
|
Assembly Quality Control |
Total |
|
Estimated overhead RM250,000 RM130,000 |
RM380,000 |
|
Estimated machine hour 21,000 hours 3,000 hours |
24,000 hours |
|
Estimated direct labour hour 20,000 hours 80,000 hours
REQUIRED:
(a) Calculate the predetermined overhead rate using: (i) Plant-wide rate (ii) Multiple department rates |
100,000 hours |
b) Based on your calculation in (a), justify which rate is more reliable.
Assume that at the end of the year, the books of DTSB show:
Item RM
Over-applied overhead 32,000
Cost of Goods Sold 130,000
Work in Process 40,000
Finished Goods 30,000
c) Advise DTSB on how to adjust the over-applied overhead using the TWO (2) methods. (Show the
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