Denman Enterprise prepared its overhead budget for the 31 August 2021. 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 Denman Enterprise:

	Forming	Assembly	Packaging	Stores	Maintenance
Overhead cost	1,125,000	1,350,000	2,362,500	900,000	600,000
Machine hours	187,500	165,000	300,000	-	-
Labour hours	281,250	187,500	360,000	-	-

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

	Forming	Assembly	Packaging	Stores	Maintenance
Stores	20%	40%	15%	----	25%
Maintenance	45%	25%	20%	10%	----

During the period ended 31 August 2021, actual overheads in the forming, assembly and packaging departments were as follows respectively: $1,087,500, $1,462,500 and $2,625,000; while, actual activity levels for all three were:

	Forming	Assembly	Packaging
Machine hour	206,250	213,750	352,500
Labour hours	300,000	198,750	363,750

Required:

(a) Use the reciprocal (simultaneous equation) method to derive the re-allocated overheads to production departments and derive the overhead absorption rates for these departments. (16 marks)

(b) From the information calculate in part (a) above, derive the over /under absorption of overheads in each department. (6 marks)

(c) Calculate the selling price of Job 168 to the nearest $ based on the estimates below and using the overhead absorption rates calculated in (a) above. The company requires a profit of 25% of the selling price.

Material	70 kilos @ $30 per kilo
Direct Labour Forming	10 hours @ $130 per hour
Direct Labour Assembly	7 hours @ $80 per hour
Direct Labour Packaging	6 hours @ $45 per hour
Machine hours Forming	10
Machine hours Assembly	8
Machine hours Packaging	5