1. Alb Ltd. You have been asked to suggest a method of deducing the full cost of various production orders of Alb Ltd. This method will be used as a basis for setting prices. The production orders vary greatly in size and nature from one to the next. The following information has been taken from the budget for the forthcoming financial year: Direct labour hours: 100,000 hours Machine hours: 90,000 hours Manufacturing costs: Power Direct materials Machine maintenance and repairs Factory heat and light Lubricants and cleaning materials Direct labour 40,000 200,000 38,000 4,000 6,000 600,000 Depreciation: factory buildings machinery 130,000 402,000 100,000 Indirect labour 1,520,000 The business is not departmentalised for accounting purposes. All direct labour is paid the same hourly rate. Required: 1. Explain the difference between direct and indirect costs. Give an example of each. Can a given cost item be both a direct cost and an indirect cost? Why do managers distinguish between direct costs and indirect costs? 2. Calculate two feasible overhead rates for the year. 3. Prepare full costings for Order No 101 using each of the rates calculated in (2) (that is, two separate costings). The cost sheet for Order No 101 shows the following: Raw materials 5,000 Direct labour hours 4,000 hours Machine hours 1,900 hours. 4. State briefly which of the two bases of overheads you prefer and why