Kaminsky Ltd manufactures belts and braces. The firm is organized into five departments. These are belt-making, braces making, and three service departments (maintenance, warehousing
and administration).
Direct costs are accumulated for each department. Factory-wide indirect costs (which are fixed for all production levels within the present capacity limits) are apportioned to departments on the basis of the percentage of floors pace occupied. Service department costs are apportioned on the basis of estimated usage, measured as the percentage of the labour hours operated in the service department utilized by the user department.
Each service department also services at least one other service department.

(a) You are required to calculate the total cost per unit of belts and braces respectively, in accordance with the system operated by Kaminsky Ltd.
(b) In addition to the above data, it has been decided that the selling prices of the products are to be determined on a cost plus basis, as the unit total cost plus 20 per cent. Two special orders have been received, outside the normal run of business, and not provided for in the budget. They are as follows:
(i) an order for 1000 belts from Camfam, an international relief organization, offering to pay £5000 for them.
(ii) a contract to supply 2000 belts a week for 50 weeks to Mixon Spenders, a chain store, at a price per belt of 'unit total cost plus 10 per cent'.
You are required to set out the considerations which the management of Kaminsky Ltd should take into account in deciding whether to accept each of these orders, and to advise them as far as you are able on the basis of the information given.
(c) 'Normalized overhead rates largely eliminate from inventories, from cost of goods sold, and from gross margin any unfavorable impact of having production out of balance with the long-run demand for a company's products.' You are required to explain and comment upon the above statement.

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Admi Main dration terance Ware Company eltsBaces de det houg ta 1) output and sales (units: Output budgeted Sales budgeted 2) Diect vable costs(E000 150 000 60000 100000 50000 100000 50 000 2 200 200 50 100 50 3) Factorywide txed indirect costs (£000) (4) Ror-space r%) 5) Usage of sevice department Hour hours (%) 9