BrightTech Appliances Ltd. is a leading manufacturer of smart home devices such as the SmartCool AC, PowerLite Inverter, and EcoDry Dryer. Amid…

CA Intermediate · Cost and Management Accounting · RTP · January 2026
BrightTech Appliances Ltd. is a leading manufacturer of smart home devices such as the SmartCool AC, PowerLite Inverter, and EcoDry Dryer. Amid increasing operational complexity, the company's finance controller has initiated a review of overhead allocations to gain better control over departmental efficiency and product profitability. The company operates through four major departments: Production – handles manufacturing across three plants using advanced machinery including stores management.Administration – supports HR, finance, legal, and compliance.Sales & Distribution – manages retail tie-ups, e-commerce, and logistics.General Management – oversees strategy, innovation, and executive-level operations. The extract from the budget for the next financial year is as follows: Particulars Amount (₹) Notes Raw Material Cost 5,75,00,000 Consumed in a ratio of 3:4:3 for the three products Indirect Material Cost 12,50,000 Manufacturing - 7,20,000, Stores - 25,000, General admin - 3,80,000, Personnel - 95,000, Sales - 30,000 Salary & Wages 4,20,00,000 Includes direct wages of 1,60,00,000 (temporary contract workers) Rent & Property Tax 1,20,000 90,000 Warehouse Rent, 30,000 Property Tax Depreciation on Non-Current Assets 25,00,000 Factory/office building - 10,50,000, ACs - 2,00,000, Machinery 12,50,000 Power & Fuel 4,90,000 4,70,000 for manufacturing, 20,000 for delivery vans Machinery Insurance Premium 5,00,000 At 4% of WDV of machinery Group Employee Insurance 3,10,000 Based on gross salary (excluding direct workers and top management) Printing & Stationery 8,20,000 Manufacturing - 21,000, Finance - 5,50,000, Legal - 28,000, Sales - 2,21,000 Audit Fees 1,40,000 Statutory and internal audit Electricity Expense 4,00,000 Metered use: Production 5,600, Admin 10,000, Sales & Distribution 4,000, General Management 1,600 units Telephone & Mobile 4,95,000 Production - 1,25,000, Personnel - 50,000, General Mgmt - 30,000, Sales - 75,000, Customer Support - 2,15,000 Travelling Expenses 24,00,000 Production - 5,50,000, General Mgmt - 12,00,000, Sales - 6,50,000 Meal Coupon Subsidy 2,25,000 3,000 per employee on roll Software License Renewals 16,50,000 Stores Management - 8,50,000, Finance - 1,50,000, Stores - 30,000, Customer Support - 6,20,000 Misc. Expenditures 9,50,000 Allocated based on direct expenses Additional Information: Employee Count: Production 22, Admin 20, Sales & Distribution 28Average Gross Salary: Production - 6,30,000, Admin - 4,20,000, Sales & Distribution - 3,50,000, General Mgmt - 2,80,000Floor Area: Production 9,900 m², Admin 3,600 m², Sales & Distribution 2,700 m², General Mgmt 1,800 m²AC Tonnage: Production 6,000 RT, Admin 3,000 RT, S&D 3,000 RT, General Mgmt 1,500 RTDepreciation Rates: Building 5%, AC 15%, Machinery 10%Department Roles:General Mgmt: 70% Sales strategy, 20% Production/Marketing, 10% AdminAdmin: 50% Production, 50% Sales. Required: Prepare a schedule of Cost Allocation for Production Dept., Administration Dept., Sales & Distribution Dept. and General Management.Prepare a schedule of Cost Apportionment (Primary Distribution) for Production Dept., Administration Dept., Sales & Distribution Dept. and General Management.Prepare a schedule of Secondary distribution of Administration Dept. and General Management costs.

Suggested Answer and Working Notes:

(i) Schedule of Cost Allocation among the Departments Total Production Dept. Administration Dept. Selling & Distribution Dept. General Management Raw Material Cost 5,75,00,000 5,75,00,000 - - - Indirect Material Cost: 12,50,000 7,45,000 4,75,000 - 30,000 Salary & Wages 1,60,00,000 1,60,00,000 - - - Rent & Property tax 90,000 - - - 90,000 Depreciation on Machinery 12,50,000 12,50,000 - - - Power & fuel 4,90,000 4,70,000 - 20,000 - Insurance premium on machinery 5,00,000 5,00,000 - - - Printing & Stationery: 8,20,000 21,000 5,78,000 2,21,000 - Audit fees 1,40,000 - - - 1,40,000 Telephone & Mobile expenses: 4,95,000 1,25,000 50,000 2,90,000 30,000 Travelling expenses 24,00,000 5,50,000 - 6,50,000 12,00,000 Software license renewal fees: 16,50,000 8,80,000 1,50,000 6,20,000 - Total Allocated Direct Expenses 8,25,85,000 7,80,41,000 12,53,000 19,21,000 13,70,000 (ii) Schedule of Cost Apportionment (Primary Distribution) Basis Total Production Dept. Administration Dept. Selling & Distribution Dept. General Management Allocated Cost Direct 8,25,85,000 7,80,41,000 12,53,000 19,21,000 13,70,000 Salary & Wages Gross Salary (9:6:5:4) 2,60,00,000 97,50,000 65,00,000 54,16,667 43,33,333 Rent & Property tax Floor Area (11:4:3:2) 30,000 16,500 6,000 4,500 3,000 Depreciation Building Floor Area (11:4:3:2) 10,50,000 5,77,500 2,10,000 1,57,500 1,05,000 AC RT (4:2:2:1) 2,00,000 88,889 44,444 44,444 22,222 Group Employee Insurance Gross Salary (9:6:5:4) 3,10,000 1,16,250 77,500 64,583 51,667 Electricity Expenses Units (14:25:10:4) 4,00,000 1,05,660 1,88,679 75,472 30,189 Meal Coupon Subsidy No. of Employees (22,20,28) 2,25,000 66,000 60,000 84,000 15,000 Miscellaneous Expenditure Direct Expenses (Allocated Expenses) 9,50,000 8,97,729 14,414 22,098 15,760 Total 11,17,50,000 8,96,59,528 83,54,037 77,90,264 59,46,170 (iii) Schedule of Secondary Distribution: Basis Total Production Dept. Administration Dept. Selling & Distribution Dept. General Management Total Allocated and Apportioned costs 11,17,50,000 8,96,59,528 83,54,037 77,90,264 59,46,170 General Management (2:1:7) 59,46,170 11,89,234 5,94,617 41,62,319 (59,46,170) 9,08,48,762 89,48,654 1,19,52,583 - Administration dept. (1:1) 89,48,654 44,74,327 (89,48,654) 44,74,327 - Total 9,53,23,089 - 1,64,26,910 -

Topics: Overheads - Absorption Costing Method

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