Dela Value Inc. is preparing its overhead budget for the 31 March 2020. The entity produces an item that passes through three production departments and two service departments. The three production departments are Forming, Assembly and Packaging. The two service departments are Stores and Maintenance.

The following budgeted overheads and budgeted activity levels are related to Dela Value Inc.

FormingAssembly Packaging Stores Maintenence

Overhead cost$3,000,000$3,600,000$6,300,000$2,400,000$1,600,000

Machine hours500,000 440,000 800,000

Labour hours 750,000 500,000 960,000

Overhead is absorbed on a labour hour basis.

It has been estimated that service department usage is as follows:

FormingAssemblyPackagingStoresMaintenance

Stores 20%40% 15% ----25%

Maintenance45%25% 20% 10% ----

During the period ended 31 March 2020, actual overheads in the forming, assembly and packaging departments were as follows respectively: $2,900,000, $3,900,000 and $7,000,000; while, actual activity levels for all three were:

FormingAssemblyPackaging

Machine hour550,000570,000940,000

Labour hours800,000530,000970,000

Required:

1. Use the reciprocal(simultaneous equation)method to derive the re-allocated overheads to production departments and derive the overhead absorption rates for these departments.
2. From the information calculate in part above, derive the under/under absorption of overheads in each departments