1. ABC Ltd applies factory overhead in its two production departments using a predetermined rate based on budgeted machine hours in the Cutting Department and based on budgeted labour hours in the Machining Department. Variable canteen costs are allocated to the production departments based on budgeted number of employees, and fixed costs are allocated based on the capacity number of employees. Variable maintenance costs are allocated on the budgeted number of direct labour hours, and fixed costs are allocated on labour hour capacity.

Details relating to next years operations are given below:

	Service		Production
Budgeted costs ():	Canteen	Maintenance	Cutting	Machining
Variable costs	40,000	90,000	200,000	300,000
Fixed costs	30,000	30,000	100,000	120,000
Other data:
Direct labour hours (capacity)			10,000	20,000
Direct labour hours (budgeted)			9,000	18,000
Number of employees (capacity)			40	80
Number of employees (budgeted)			30	50
Machine hours (capacity)			30,000	60,000
Machine hours (budgeted)			18,250	50,000

Required:

1. Prepare a schedule showing the allocation of budgeted service department costs to production departments. In your answer, ensure that you show variable and fixed costs allocated from each service department, and total costs of each production department to be used for the calculation of overhead rates.
2. Determine the predetermined overhead rates for each production department.