A manufacturing company has four production departments. Overhead is absorbed to its production departments by means of departmental rates per direct labour hour. In a particular year there was a large difference between the overhead incurred and overhead absorbed. On analysis, you get the following information:
You are required to:
(a) calculate for each department the direct labour-hour rates of overhead incurred.
(b) calculate the extent to which the value of work-in-progress and finished goods be increased or decreased for each department for the year in view of corrected rates.
(c) what will be the impact on total profit of the company in view of the correction in above?
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