Bookdon Pic manufactures three products in two production departments. a Machine Shop and a Fitting Section; it also has two Service Departments. a canteen and a machine maintenance section. Shown below are next year's budgeted production data and manufacturing costs for the company.

It has been estimated that approximately 70% of the Machine Maintenance Section's costs are incurred servicing the Machine Shop, and the remainder incurred servicing the Fitting Section.
Required:
(al (il Calculate the following budgeted overhead absorption rates :
A machine hour rate for the Machine Shop.
A rate expressed as a percentage of direct wages for the Fitting Section.
All workings and assumptions should be clearly shown.
(iiI Calculate the budqeted manufacturing overhead cost per unit of Product X.
(bl The production director of Bookdon Pic has suggested that. 'as the actual overheads incurred and units produced are usually different from that budgeted and as a consequence profits at each month end are distorted by under/over absorbed overheads, it would be more accurate to calculate the actual overhead cost per unit each month end by dividing the total number of all units actually produced during the month into the actual overheads incurred.'
Critically examine the production director 's suggestion .

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Product Production (units) Prime cost: X Y Z 4,200 6,900 1,700 11 14 17 62 433 2 21 4 Direct materials ( per unit) Direct labour- Machine shop (E per unit) Fitting section ( per unit) Machine hours (per unit) 12 6 Budgeted overheads Machine shop Fitting Canteen Machine Total section maint- enance section Allocated overheads 27,660 19,470 16,600 26,650 90,380 Rent, rates, heat and light 17,000 Depreciation and insurance of equipment Additional data: Gross book value of equipment 150,000 75,000 30,000 45,000 No. of employees 18 14. 4 4 Floor space occupied - sq metres 3,600 1,400 1,000 800 25,000