An engineering company which uses job costing to attribute costs to individual products and services provided to its customers has began the preparation of its fixed production overhead cost budget for 2017.

Cost has been identified as follows:

Machining Assembly Finishing Stores Maintenance

K000 K000 K000 K000 K000

Apportioned cost 6,000 2,500 1,500 1,000 800

The stores and maintenance departments are production department and provide services as follows:

Machining Assembly Finishing Stores Maintenance Stores 40% 30% 20% - 10%

Maintenance 55% 20% 20% 5% - T

he number of machine and labour hours budgeted for 2018 is:

Machining Assembly Finishing

Machine 50,000 4,000 5,000

Labour hours 10,000 30,000 20,000

Required: (a) Calculate appropriate overhead absorption rates for each production department for 2017. (12 marks)

(b) Prepare a quotation for job K34 to be commenced early in 2017 assuming it has:

Direct materials Costing K24,000

Direct labour Costing K15,000

And requires:

Machine Labour

Machining department 45 10

Asembly 5 15

Finishing department 4 12

Add that profit is 20% of selling price