A company is preparing its overhead budgets for the December 2020 period. The entity makes a product that passes through three production department and is also affected by two service departments. The three production departments are milling, processing and packaging, and two service departments are stores and inspections.

The following budgeted overheads and budgeted activity levels have been produced:

	Milling	Processing	Packaging	Stores	Inspections
Overhead cost	$300,000	$360,000	$630,000	$240,000	$160,000
Labour hours	50,000	40,000	80,000

Overhead is absorbed on a labour hour basis.

It has been estimated that service department usage is as follows:

	Milling	Processing	Packaging	Stores	Inspections
Stores	25%	35%	20%	---	20%
Inspections	40%	20%	30%	10%	---

During the period actual overheads in the production departments were milling, processing and packaging were $290,000, $390,000 and $700,000 respectively while, actual activity levels for all three were 50,000, 57,000 and 78,000 labour hours respectively.

Required:

(a) Use the simultaneous equation method to derive the re-allocated overheads to production departments and derive the overhead absorption rates for these departments. (Use two decimal places for OAR). (17 marks)

(b) Calculate the over/under absorption of overheads in each department. (6 marks)

(c) Calculate the selling price of a unit of product (to the nearest $) based on the estimates below and using the absorption rates calculated in (a). The company requires a profit of 25% of the selling price. (8 marks)

Material	80 kilos at $15 per kilo
Direct Labour: Milling	20 hours at $14 per hour
Direct Labour: Processing	10 hours at $14 per hour
Direct Labour: Packaging	15 hours at $14 per hour