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Cost and Management Accounting
Quick questions on Overhead allocation and absorption explained: H2 Principles of Accounting
6short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is choosing an apportionment basis?Show answer
The basis should reflect how the cost is incurred:
What are reapportioning service centres?Show answer
Some cost centres (stores, maintenance, canteen) serve the production departments rather than making products. Their costs are reapportioned to the production departments on a sensible basis (for example maintenance by machine hours), so that all overhead ends up in the production departments that will absorb it into units.
What is calculating the absorption rate?Show answer
Once all overhead sits in a production department, it is absorbed into products using a predetermined rate:
What is q1?Show answer
Distinguish allocation from apportionment. [2 marks]
What is q2?Show answer
A department's overhead is \90\,00015\,0005$ labour hours. [3 marks]
What is q3?Show answer
Explain why a machine-intensive department should absorb overhead on machine hours. [2 marks]
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