Allied Machines Ltd. manufactures and distributes a wide range of household appliances. The company is organised into various cost centres and management calculate product cost based on the number of cost centres that a typical product passes through during its production cycle. The company produces one basic dishwasher using five different cost centres for accounting purposes. There are three production departments (Machining, Assembling and Finishing) and two service departments (Materials Handling and Production Control). Costs for last year, when 2,000 machines were produced, were as follows: Materials  Machining    240,000 Assembly    160,000 Finishing     40,000 Materials handling     4,000 Wages Machining                 10,000 hours at 3.72 each Assembly       5,000 hours at 2.88 each Finishing             3,000 hours at 3.60 each Materials handling    8,000 Production control        11,200  Other Costs      Machine shop    41,920 Assembly    12,960 Finishing    7,920 Materials handling   8,000 Production control   2,400 It is estimated that the benefit derived from the service departments are as follows:  Materials handling  Production control Machine shop     60%   40% Assembly     30%   30% Finishing     10%   20% Materials handling    n/a   10%.

 REQUIRED: 

(a)   Explain and clearly distinguish between overhead allocation and overhead apportionment in the treatment of production overheads. Support your explanation with a suitable example (non-numeric) in each case. (5 marks) 

(b)   Prepare a schedule showing the "overhead only" which should be incurred by each of  the five departments. (4 marks) 

(c)   Prepare a schedule showing the overhead re-apportioned from the service departments to the production departments. (4 marks) 

(d)   Calculate an overhead absorption rate for each of the three production departments  using a rate per unit basis (to two decimal places of ).    (3 marks) 

(e)   Prepare a schedule showing the components of total production cost for one  dishwasher.                  (7 marks) 

(f)   Assuming that Allied Machines Ltd. use "production cost plus" as a pricing mechanism, estimate the selling price (to the nearest ) using both a margin of 20% and a mark-up of 25%