As the management accountant of Zorro Ltd, write a report to the Directors outline why it is important for a business to account for and allocate overheads correctly.

Zorro Limited are a manufacturing company. The following information relates to a manufacturing business, which has two production departments and two support /service departments Corporate Management Services Services Total VW Machining Finishing 112,500 180,000 Allocated overheads 397,500 37,500 67,500 General overheads Machine running costs Machine depreciation Premises costs Indirect staff costs 240,075 133,950 714,000 120,000 The following information is also available: Production Depts Service Depts Management Services TOTAL Machine Hours Machine Value () Floor Area (Sq. Mtrs.) Number of staff Labour hours 82,500 3,525,000 10,500 60 157,500 Machining 75,000 3,150,000 7,500 40 56,250 Corporate Finishing Services 7,500 375,000 1,500 750 10 5 67,500 22,500 750 5 11,250 The 2 Support Depts carry out work for the production Departments but do not do work for each other. The overheads costs allocated/apportioned to the Corporate Services department are to be reapportioned between the productive departments, on the basis of staff numbers. The overhead costs allocated/apportioned to the Management Services departments are to be re-apportioned between productive departments, in the basis of machine value