The estimated production data of the Fitful Co. Ltd for April are as follows:

Direct materials £ 1200 Direct labour £2400 Factory overhead £1600 Labour hours 4000 Machine hours 3200 Required:

(1) Compute the factory overhead absorption rate, using three different levels of activity, and state briefly the merits of each method.

(2) Apply each of the three rates ascertained to the following job and show the resulting profit in each case assuming the sale price of the job is £40.00:
Actual costs and time for Job No. 62.
Direct materials Direct labour Labour hours Machine hours £10 £12 18 15