Calvin owns a business manufacturing electrical parts. The business operates two production departments — machining and assembly.

The business also has two service departments stores and maintenance. 

The budgeted overheads for the year ended 31 January 2014 were as follows. 

The following information is available. 

Required

a. Apportion the overhead costs to the four departments and reapportion the service centre costs to the production departments using a suitable basis. 

b. Calculate an appropriate overhead absorption rate, correct to two decimal places, for each production department.

Additional information: 

The actual results for the year ended 31 January 2014 were as follows. 

c. Calculate the under- or over-absorption of factory overheads for each production department for the year ended 31 January 2014. 

d. Explain three advantages to a business of using a system of absorption costing.

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Indirect wages 240 000 Factory rent and rates 42 000 Buildings insurance 30 000 Machinery insurance 40 500 Machinery depreciation: 64 800 Lighting and heating 26 000 Power 48 000 %24