10. Ajruplani Limited manufactures a component which is used in the airline industry. The company operates two production departments, namely, the Machining Department and the Assembly Department. These two production departments are serviced by two departments, namely, the Quality Control Department and the Maintenance Department. Budgeted overheads for the year ended 30 June 2018 were as follows: Indirect wages Tools Electricity Insurance of premises Maintenance materials Rent Depreciation of machinery 492,900 9,866 64,500 8,050 1,550 80,500 40,700 Maintenance The following information is also available: Machining Floor area (sq. metres) 1,200 Number of indirect employees 15 Electricity - units 138,720 Machinery cost 298,000 Machine hours 32,360 Direct labour hours 8,090 Assembly 800 9 110,660 109,000 11,291 22,582 Quality Control 80 4 5,340 220 3 3,280 The tools were utilised as follows: Machining department 2,554 Assembly department 5,788 Quality control department 1,524 The maintenance materials were for the sole use by the Maintenance department. The cost of the Maintenance department is allocated to the other departments as follows: 50% to the machining department, 35% to the assembly department and 15% to the quality control department. The time spent by the Quality control department on the machining department amounts to 30%, whereas the remaining 70% is spent on the assembly department. The actual results for the year ended 30 June 2018 were as follows: Machining Assembly Total Overheads - 401,356 297,425 Machine Hours 31,952 12,356 Labour Hours 7,923 22,952 Required: A. Calculate the budgeted overhead recovery rates for the year ended 30 June 2018, using both the machine hour rate and the labour hour rate for each production department. (12) B. Determine the most appropriate overhead recovery rate for each production department and explain your choice. (4) C. Calculate the amount of overheads that would be over or under absorbed by each production department during the year. (6) D. Briefly explain TWO reasons why overhead recovery rates are calculated. (4) 10. Ajruplani Limited manufactures a component which is used in the airline industry. The company operates two production departments, namely, the Machining Department and the Assembly Department. These two production departments are serviced by two departments, namely, the Quality Control Department and the Maintenance Department. Budgeted overheads for the year ended 30 June 2018 were as follows: Indirect wages Tools Electricity Insurance of premises Maintenance materials Rent Depreciation of machinery 492,900 9,866 64,500 8,050 1,550 80,500 40,700 Maintenance The following information is also available: Machining Floor area (sq. metres) 1,200 Number of indirect employees 15 Electricity - units 138,720 Machinery cost 298,000 Machine hours 32,360 Direct labour hours 8,090 Assembly 800 9 110,660 109,000 11,291 22,582 Quality Control 80 4 5,340 220 3 3,280 The tools were utilised as follows: Machining department 2,554 Assembly department 5,788 Quality control department 1,524 The maintenance materials were for the sole use by the Maintenance department. The cost of the Maintenance department is allocated to the other departments as follows: 50% to the machining department, 35% to the assembly department and 15% to the quality control department. The time spent by the Quality control department on the machining department amounts to 30%, whereas the remaining 70% is spent on the assembly department. The actual results for the year ended 30 June 2018 were as follows: Machining Assembly Total Overheads - 401,356 297,425 Machine Hours 31,952 12,356 Labour Hours 7,923 22,952 Required: A. Calculate the budgeted overhead recovery rates for the year ended 30 June 2018, using both the machine hour rate and the labour hour rate for each production department. (12) B. Determine the most appropriate overhead recovery rate for each production department and explain your choice. (4) C. Calculate the amount of overheads that would be over or under absorbed by each production department during the year. (6) D. Briefly explain TWO reasons why overhead recovery rates are calculated. (4)