Case Study
PROGRAMME Bachelor of Commerce in Accounting
MODULE Cost and Management Accounting
YEAR Two (2)
INTAKE January 2024 Semester 1
MARKS 30
, QUESTION 1 (20 Marks)
A Cape Town-based manufacturing firm, CGH Manufacturing Enterprises (CGHME), has three production departments
(A, B and C) and the two service departments (X and Y). As part of the budgeting process, a senior cost accountant
employed by CGHME has gathered the following annual overhead costs:
R
Indirect materials:
Production department A 250 000
Production department B 402 500
Production department C 52 500
Service department X 10 000
Service department Y 50 000
Indirect labour:
Production department A 500 000
Production department B 500 000
Production department C 750 000
Service department X 550 000
Service department Y 740 000
Heating and lighting 350 000
Property tax 400 000
Insurance of machinery 180 000
Depreciation of machinery 960 000
Insurance of buildings 145 000
Salaries of works management 4 600 000
The following information is also available:
Carrying value of Floor area Number of Machine hours
machinery, R occupied (m2) employees
Production department A 4 000 000 5 000 150 1 000 000
Production department B 2 500 000 2 500 100 800 000
Production department C 500 000 7 500 150 850 000
Service department X 250 000 7 500 50
Service department Y 250 000 2 500 50
7 500 000 25 000 500
As an accounting intern in the office of the senior cost accountant, you have been asked to prepare an overhead allocation
statement (using traditional costing). You have been asked to use the repeated distribution method to prepare the
secondary allocation of the overheads of the two service departments (X and Y) to the three production departments (A,
B and C) according to the following percentages:
Secondary allocation: A B C X Y
Percentage of service department X to 20 40 30 - 10
Percentage of service department Y to 40 20 20 20 -
The three production departments (A, B and C) absorb overheads on machine hour basis.
PROGRAMME Bachelor of Commerce in Accounting
MODULE Cost and Management Accounting
YEAR Two (2)
INTAKE January 2024 Semester 1
MARKS 30
, QUESTION 1 (20 Marks)
A Cape Town-based manufacturing firm, CGH Manufacturing Enterprises (CGHME), has three production departments
(A, B and C) and the two service departments (X and Y). As part of the budgeting process, a senior cost accountant
employed by CGHME has gathered the following annual overhead costs:
R
Indirect materials:
Production department A 250 000
Production department B 402 500
Production department C 52 500
Service department X 10 000
Service department Y 50 000
Indirect labour:
Production department A 500 000
Production department B 500 000
Production department C 750 000
Service department X 550 000
Service department Y 740 000
Heating and lighting 350 000
Property tax 400 000
Insurance of machinery 180 000
Depreciation of machinery 960 000
Insurance of buildings 145 000
Salaries of works management 4 600 000
The following information is also available:
Carrying value of Floor area Number of Machine hours
machinery, R occupied (m2) employees
Production department A 4 000 000 5 000 150 1 000 000
Production department B 2 500 000 2 500 100 800 000
Production department C 500 000 7 500 150 850 000
Service department X 250 000 7 500 50
Service department Y 250 000 2 500 50
7 500 000 25 000 500
As an accounting intern in the office of the senior cost accountant, you have been asked to prepare an overhead allocation
statement (using traditional costing). You have been asked to use the repeated distribution method to prepare the
secondary allocation of the overheads of the two service departments (X and Y) to the three production departments (A,
B and C) according to the following percentages:
Secondary allocation: A B C X Y
Percentage of service department X to 20 40 30 - 10
Percentage of service department Y to 40 20 20 20 -
The three production departments (A, B and C) absorb overheads on machine hour basis.
