Calculate an overhead rate based on the machine hours in Table MA.1, and use this to recalculate the current product profitability.

Table MA.1 Current product data Volume Selling Direct Distribution Bottles Bottles (000 price costs cost per per per bottles) per per bottle machine labour bottle bottle hour hour Shampoo 2,000 1.50 0.60 0.20 2,600 14,000 Conditioner 1,500 1.75 0.50 0.20 3,100 6,700 Liquid soap 500 1.25 0.40 0.30 2,010 1,500 Note: Assume direct costs and distribution are 100% variable. The majority of direct costs are materials with a small proportion of direct labour. Table MA.2 Factory indirect costs k Supervisor salaries 94.3 Insurance 194.6 Depreciation: equipment 120.6 Power 274.9 Factory administration 142.3 Total manufacturing cost 826.7 Notes: Indirect costs are currently allocated on a direct labour hour basis. Non-manufacturing costs include sales and marketing of 675,000, allocated on sales volume, and a head office charge of 10% of sales revenue