Page 79 - BA2 Integrated Workbook STUDENT 2018

Overhead analysis

We can now substitute this value into the other equation and solve for S2.

S2 = 15,000 + (0.1× 21,859)

S2 = 17,186

Now the total overhead for each production centre can be calculated:

P1 = 150,000 + 0.55S1 + 0.3S2

= 150,000 + (0.55 × 21,859) + (0.3 × 17,186) = 167,178

P2 = 205,000 + 0.35S1 + 0.65S2

= 205,000 + (0.35 × 21,859) + (0.65 × 17,186) = 223,822

You can see that (apart from a small rounding) this is the same answer that we
got using the repeated distribution method.

Illustrations and further practice

Now try TYU 6

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