Oriplast Ltd. has two production departments P1, P2 and two service departments S1 and S2. For a particular period the common expenses are as follows:
| Particulars | Rs. |
|---|---|
| Power | 28,000 |
| Depreciation of plant | 24,000 |
| Manager's salary (plant) | 8,000 |
| Canteen expenses | 8,000 |
| Rent | 5,000 |
Additional Information:
| Particulars | P1 | P2 | S1 | S2 |
|---|---|---|---|---|
| Area (sq.ft.) | 2,000 | 1,500 | 1,000 | 500 |
| No. of employees | 6 | 4 | 3 | 3 |
| Horse Power ratio | 5 | 4 | 3 | 2 |
| Plant value (Rs.) | 60,000 | 40,000 | 15,000 | 5,000 |
Apportion the common expenses among all the departments.
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Start your 14-day free trial to unlock the full solution →Apportion each expense on its proper base; totals are P1 31,000, P2 22,166.67, S1 12,500, S2 7,333.33 = Rs. 73,000.
Bases of apportionment chosen
| Expense | Rs. | Basis | Ratio (P1:P2:S1:S2) |
|---|---|---|---|
| Power | 28,000 | Horse-power | 5 : 4 : 3 : 2 (total 14) |
| Depreciation of plant | 24,000 | Plant value | 60 : 40 : 15 : 5 (total 120) |
| Manager's salary (plant) | 8,000 | Plant value | 60 : 40 : 15 : 5 (total 120) |
| Canteen expenses | 8,000 | No. of employees | 6 : 4 : 3 : 3 (total 16) |
| Rent | 5,000 | Area (sq. ft.) | 2000 : 1500 : 1000 : 500 (total 5000) |
Power (Rs. 28,000 / 14 = Rs. 2,000 per HP unit)
| Dept | HP | Amount (Rs.) |
|---|---|---|
| P1 | 5 | 10,000 |
| P2 | 4 | 8,000 |
| S1 | 3 | 6,000 |
| S2 | 2 | 4,000 |
Depreciation (Rs. 24,000 on plant value Rs. 1,20,000 = Rs. 0.20 per Rs.)
| Dept | Plant value | Amount (Rs.) |
|---|---|---|
| P1 | 60,000 | 12,000 |
| P2 | 40,000 | 8,000 |
| S1 | 15,000 | 3,000 |
| S2 | 5,000 | 1,000 |
Manager's salary (Rs. 8,000 on plant value Rs. 1,20,000)
| Dept | Plant value | Amount (Rs.) |
|---|---|---|
| P1 | 60,000 | 4,000.00 |
| P2 | 40,000 | 2,666.67 |
| S1 | 15,000 | 1,000.00 |
| S2 | 5,000 | 333.33 |
Canteen (Rs. 8,000 / 16 employees = Rs. 500 per employee)
| Dept | Employees | Amount (Rs.) |
|---|---|---|
| P1 | 6 | 3,000 |
| P2 | 4 | 2,000 |
| S1 | 3 | 1,500 |
| S2 | 3 | 1,500 |
Rent (Rs. 5,000 / 5,000 sq.ft. = Rs. 1 per sq.ft.)
| Dept | Area | Amount (Rs.) |
|---|---|---|
| P1 | 2,000 | 2,000 |
| P2 | 1,500 | 1,500 |
| S1 | 1,000 | 1,000 |
| S2 | 500 | 500 |
Primary Distribution Summary (Rs.)
| Expense | P1 | P2 | S1 | S2 | Total |
| --- | --- | --- | --- | --- | --- | …
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