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Workshop Week 2

This document contains two problems related to budgeting and cost allocation. The first problem involves calculating overhead absorption rates and overhead recovery for a firm of accountants. The second problem involves apportioning facility, department, and service costs across degree programs at a university to calculate the average cost per student for each program.

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Jaquin
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37 views

Workshop Week 2

This document contains two problems related to budgeting and cost allocation. The first problem involves calculating overhead absorption rates and overhead recovery for a firm of accountants. The second problem involves apportioning facility, department, and service costs across degree programs at a university to calculate the average cost per student for each program.

Uploaded by

Jaquin
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Additional Problems

A firm of accountants have the following budgeted costs for the year,
£000
Rent 48
Rates 34
Motors 22.5
Stationery 11
Heat and light 13.5
Communications 31.5
Salaries 125

The three partners intend to work 46 weeks per year. Whilst they will be in the office 45
hours per week, they will only be working on clients' behalf for 80% of that time.

a - What is the overhead absorption rate per partner hour?


b - If they wished to have a combined rate to include their own salaries (£30000 per year),
what would the combined rate be?
c - If it transpires that the partners actually work on client activities for 85% of the time,
then overheads would be over-recovered. By how much would this over recovery be? If
the combined rate calculated above had been charged to clients, how much extra salary
would the partners have earned?
A university offers a range of degree courses, which are managed by three faculties which
themselves are organised into teaching departments. In addition there is an administration
department and a central services area.
The following costs are budgeted for the year; £000
Occupancy (rent, rates, insurance of buildings) 1500
Teaching departments 5525
Administration 1775
Central services 1000
Faculty costs 700
Total 10500

1)Occupancy costs are apportioned on the basis of area, which is as follows;


Faculties 7500 sq ft
Teaching depts. 20000 sq ft
Administration 7000 sq ft
Central services 3000 sq ft
2)Faculty costs are charged to degree courses on a percentage basis.
3)Administration costs are charged straight to faculties.
4)Teaching department costs are charged to degree courses on a percentage basis.
5)Central services are charged straight to faculties.
Degree courses Total Business Mech.Eng. Art Others
No. of undergraduates 2500 80 50 120 2250
Apportionments
Teaching (%) 100 3 2.5 7 87.5
Faculties (%) 100 2.5 5 4 88.5

Calculate the average cost per student for each of the three degree courses in business,
mech.eng., and art.

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