Theory question 104
Departmental AccountsAgbo Enterprises operates departmental accounting; the owner is concerned with the bases of apportioning the following overhead expenses: (i) heating and lighting; (ii) advertisement; (iii) canteen expenses; (iv) depreciation of building; (v) insurance of premises
(a) Outline one basis of apportioning each of the overhead expenses in Agbo Enterprises.
(b) State five benefits of the type of account operated by Agbo Enterprises.
Show the model answer
(a) (i) Heating and lighting: floor area (or cubic capacity/volume) of each department.
(ii) Advertisement: sales (turnover) of each department.
(iii) Canteen expenses: number of employees in each department.
(iv) Depreciation of building: floor area occupied.
(v) Insurance of premises: floor area occupied (or value of building space used).
(b) Any five: shows the gross and net profit of each department; identifies unprofitable departments for corrective action; helps compare departments' performance; helps decide on stocking, pricing and expansion; helps reward departmental managers (commission); aids control of costs and stock in each department; provides information for planning and budgeting.
Match each overhead to the factor that drives it, then list five uses of departmental accounts.