Question 12.6: Autosparkle Ltd offers a motor vehicle paint-respray service...
Autosparkle Ltd offers a motor vehicle paint-respray service that ranges from painting a small part of a sedan car, usually after a minor accident, to a complete respray of a double-decker bus. Each job starts life in the Preparation Department, where it is prepared for the Paintshop. In the Preparation Department, the job is done by direct workers, mostly taking direct materials from stores and treating the old paintwork to prepare the vehicle for respraying. Thus, the job will be charged with direct materials and direct labour and a share of the Preparation Department’s overheads. The job then passes into the Paintshop Department, already valued at the costs that it has picked up in the Preparation Department.
In the Paintshop, the staff draw direct materials from the stores and direct workers respray the job with a sophisticated spraying apparatus and by hand. So, in the Paintshop, the job is charged with direct materials and direct labour plus a share of that department’s overheads. The job now passes to the Finishing Department, valued at the cost of the materials, labour and overheads accumulated in the first two department.
In the Finishing Department, jobs are cleaned and polished ready for the customer. Further direct labour and, in some cases, materials are added, and the job picks up a share of that department’s overheads. The job, now complete, passes back to the customer.
Figure 12.4 shows how this process works for a particular job. The basus of charging overheads to jobs (e.g. direct labour hours) might be the same for all three departments or it might differ from one department to another. Spraying apparatus costs might dominate the Paintshop costs, so overheads might well be charged to jobs on a machine hour basis. The other two departments would probably be labour-intensive, so direct labour hours might seem appropriate there.
