1 Hippo Limited is a specialist joinery business manufacturing bespoke pieces for commercial clients. Currently, the company prices its jobs at prime cost plus a mark-up of 80%. The newly appointed financial controller believes that this policy does not accurately reflect the cost of the various jobs. She is intent on introducing a full costing system for the business and suggests that jobs be priced at the full production cost plus a mark-up of 30%. The budgeted level of activity for 2022 between its two departments (assembly and finishing) is as follows: Assembly Finishing Total Direct Labour Hours 17,000 8,000 25,000 Direct labour Cost 510,000 320,000 830,000 Machine Hours 10,000 12,000 22,000 Indirect Costs 600,000 400,000 1,000,000 The financial controller is undecided between applying overheads on a factory-wide basis using labour hours or on a departmental basis using the dominant activity. She has asked you to help assess these options using a potential job for which the company has been asked to quote a price. The design team have provided you with the expected inputs into this job, as follows: Assembly Finishing Total Direct Labour Hours 35 26 61 Machine Hours 30 45 75 Direct Materials 8,000 2,000 10,000 At the end of the year, you determine that the actual activity and indirect costs were: Assembly Finishing Total Direct Labour Hours 20,500 9,000 29,500 Machine Hours 11,000 12,000 23,000 Indirect Costs 750,000 350,000 1,100,000 The labour pay rate remained at the budgeted rates. Required: a) Calculate the price to be quoted for the job under consideration using the current pricing policy. (5 marks) b) Calculate the price to be quoted for the job using the factory-wide overhead absorption basis. (8 marks) c) Calculate the price that would be quoted for the job if a departmental basis is used to allocate overheads. (8 marks) d) Calculate the under or over absorption of overheads that will occur if the factory-wide basis is adopted. (6 marks) e) Calculate the under or over absorption of overheads that will occur if the departmental basis is adopted. (8 marks) f) Hippo Limited is a "price-maker" in their particular industry. Explain how the usefulness of full costing differs for price-makers and price-takers