(b) Mah Seng Manufacturing Sdn Bhd manufactures refrigerators for home and industrial use. The home use refrigerators are standard units while the industrial refrigerator are larger units used in restaurants. The budgeted cost for the various departments are as follows:

	Service Department				Production Department
	Factory Admin. (RM)	Cleaning Services (RM)	Personnel (RM)	Maintenance (RM)	Machining (RM)	Assembly (RM)
Budgeted overhead cost before inter-department cost allocations	270,000	68,760	28,840	45,200	376,300	175,900

The company allocates service department costs to other departments in the order listed below:

Department	No. of Employees	Total Labour hours	Sq. feet of space occupied	Direct Labour hours	Machine Hours
Factory Admin	12	-	5,000	-	-
Cleaning Services	4	3,000	2,000	-	-
Personnel	5	5,000	3,000	-	-
Maintenance	25	22,000	10,000	-	-
Machining	40	30,000	70,000	20,000	70,000
Assembly	60	90,000	20,000	80,000	10,000
Total	146	150,000	110,000	100,000	80,000

Machining and Assembly are production department; the other departments are service departments.

Factory Administration is allocated on the basis of labour hours; Cleaning Services on the basis of square feet occupied; Personnel on the basis of number of employees; and Maintenance on the basis of machine hours.

Required:

1. Using the step-down method, allocate the costs of the service departments to the two production departments.

(16 marks)

2. Calculate the appropriate overhead rates for the production departments using machine hours basis in Machining and direct labour hours basis in Assembly.

(4 marks)

3. Assume that the company does not bother with allocating service department costs but simply computes a single plantwide overhead rate based on total overhead costs (both service department and operating department costs) divided by total direct labour-hours.

Compute the plant wide overhead rate.

(2 marks)

Suppose a Job requires Machine Hours and Labour Hours as follows:

	Machine Hours	Labour Hours
Machining Department	190	25
Assembly Department	10	75
Total Hours	200	100

4. Using the overhead rates computed in (b) and (c) above, compute the amount of overhead cost that would be assigned to the Job if the overhead rates were developed using the step-down method and the plant wide method.

(12 marks)