Australia Industries Pty Ltd manufactures its products through two production departments. Materials are shaped and cut in the machining department and then fitted together in the assembly department. Up to now, Australia Industries Pty Ltd has used a plant-wide application rat to apply overhead using direct labour hours. a. Management wants to investigate the use of departmental overhead application rates and has produced the following estimates for your analysis.

Budget estimates

	Machining	Assembly	Total
Overhead costs	$18,000	$10,000	$28,000
Activity levels
Machine hours	6,000	1,000	7,000
Direct labour hours	1,000	4,000	5,000

Required: i.Calculate a plant-wide application rate based on direct labour hours. (5 Marks) ii.Calculate departmental application rates based on machine hours in the machining department and direct labour hours in the assembly department. (5 Marks) iii. Explain the difference between plant wide and departmental in budget in Australia Industries Pty Ltd. (5 Marks)

b. particular order required the following operating hours:

	Machining	Assembly	Total
Machine hours	5	1	6
Direct labour hours	1	2	3

Required: Calculate the total amount of overhead charged to production where: i.a plant-wide rate is used. (5 Marks) ii.a different application rate is used for each department. (5 Marks) iii. Explain the difference between plant wide and departmental in Australia Industries Pty Ltd. (5 Marks)