Dunstan Ltd manufactures tents and sleeping bags in three separate production departments. The principal manufacturing processes consist of cutting material in the pattern cutting room, and sewing the material in either the tent or the sleeping bag departments. For the year to 31 July cost
centre expenses and other relevant information are budgeted as follows:

Requirements:
(a) Prepare in columnar form a statement calculating the overhead absorption rates for each machine hour and each direct labour hour for each of the three production units. You should use
bases of apportionment and absorption which you consider most appropriate, and the bases used should be clearly indicated in your statement. (16 marks)
(b) 'The use of pre-determined overhead absorption rates based on budgets is preferable to the use of absorption rates calculated from historical data available after the end of a financial period.' Discuss this statement insofar as it relates to the financial management of a business.

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Sleeping. material Mair Total room Tents bags stores canteen tenace Indirect wages 147 200 6 400 19500 20100 41200 15000 45000 materials 54600 5300 4100 2300 _18700 24 200 depreciation 84 200 31 200 17500 24600 2500 3400 5000 Heat and light Rert and ates 31 700 13800 14400 13 500 30000 8000 10000 7000 1500 2500 1000 power usage Direct labour Machine usage Value of raw 100 17 38 32 2 112000 7000 48000 57000 - 87000 2000 40000 45000 _ issues (%) 100 62.5 12.5 12.5 12.5