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A) Differentiate between overhead apportionment and overhead absorption

Accounting

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Answer

d

KSh 7,500\text{KSh } 7,500

Step-by-step solution

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Here are the answers to Question Four:

Part a

Differentiate between overhead apportionment and overhead absorption

  • Overhead apportionment is the process of distributing common overhead costs among various cost centers or departments on an equitable basis. It involves sharing indirect costs across different parts of an organization.
  • Overhead absorption is the process of charging the overhead costs that have been apportioned to cost centers to individual products or jobs. It aims to recover these indirect costs into the cost of production using a predetermined absorption rate.

Part b

Explain two characteristics of an effective method of labor remuneration

An effective method of labor remuneration should possess several characteristics. Firstly, it must be fair and equitable, ensuring that employees perceive their pay as just in relation to their skills, effort, responsibility, and market rates. This fosters job satisfaction and reduces grievances. Secondly, it should be motivating, designed to incentivize employees to improve productivity, quality, or achieve specific organizational goals. A well-structured remuneration system can encourage higher performance and commitment.

Part c

Explain types of standards to be considered by an organization using standard cost system.

Organizations using a standard cost system consider different types of standards to evaluate performance.

  • Ideal standards represent the best possible performance under perfect operating conditions, assuming no waste, no idle time, and maximum efficiency. While rarely achievable, they serve as a theoretical benchmark.
  • Attainable standards (also known as practical standards) represent efficient performance that is achievable under normal operating conditions, allowing for some unavoidable waste, idle time, and inefficiencies. These standards are challenging yet realistic and are often considered highly motivating.
  • Basic standards are long-term standards that remain unchanged for an extended period. They are primarily used to show trends in efficiency or cost changes over time rather than for current performance evaluation, as they can become outdated.
  • Current standards are set for the current operating period, reflecting present conditions and expected efficiency levels. They are updated regularly to account for changes in prices, methods, or technology, providing a relevant basis for current performance measurement.

Part d

KSh 7,500\text{KSh } 7,500

Mr. Rickens' earnings calculation

The question asks for Mr. Rickens' earnings. Based on the information provided:

  1. Calculate the number of pages typeset.

    The time allowed to typeset a page is 30 minutes (0.5 hours). Mr. Rickens took 25 hours.

    Number of pages typeset=Total hours workedTime per page\text{Number of pages typeset} = \frac{\text{Total hours worked}}{\text{Time per page}} Number of pages typeset=25 hours0.5 hours/page=50 pages\text{Number of pages typeset} = \frac{25 \text{ hours}}{0.5 \text{ hours/page}} = 50 \text{ pages}

  2. Calculate Mr.

    Rickens' total earnings.
    The daily rate is Ksh. 300 per hour. He worked for 25 hours.

    Total Earnings=Actual hours worked×Hourly rate\text{Total Earnings} = \text{Actual hours worked} \times \text{Hourly rate} Total Earnings=25 hours×KSh 300/hour\text{Total Earnings} = 25 \text{ hours} \times \text{KSh } 300/\text{hour} Total Earnings=KSh 7,500\text{Total Earnings} = \text{KSh } 7,500

    Mr. Rickens' total earnings are KSh 7,500\boxed{\text{KSh } 7,500}.

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