Overhead analyis and calculation of product costs A furniture-making business manufactures quality furniture to customers’ orders. It has three production departments and two service departments.

Budgeted overhead costs for the coming year are as follows:

The three production departments — A, B and C, and the two service departments — X and Y, are housed in the new premises, the details of which, together with other statistics and information, are given below.

Required:

(a) Prepare a statement showing the overhead cost budgeted for each department, showing the basis of apportionment used. Also calculate suitable overhead absorption rates. (9 marks)

(b) Two pieces of furniture are to be manufactured for customers. Direct costs are as follows:

Calculate the total costs of each job.
(5 marks)

(c) If the firm quotes prices to customers that reflect a required profit of 25% on selling price, calculate the quoted selling price for each job. (2 marks)

(d) If material costs are asignificant part of total costs in a manufacturing company, describe a ‘system of material control that might be used in order to effectively control costs, paying particular attention to the stock control aspect.

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Total () 12800 Rent and Rates Machine insurance Telephone charges Depreciation 6000 3200 18000 Production Supervisor's salaries 24 000 Heating & Lighting 6400 70 400