Handy Headphones is an Irish company that is manufacturing lightweight, flexible, Bluetooth[1] enabled, and waterproof headphones. It is proving to be very popular among people wanting to listen to music in the shower or while swimming on holiday or at community leisure centers’ lane swimming sessions (mainly because of their £159 price tag). Before the headphones can be delivered to the warehouse for distribution, they pass through a five[1]stage production process.

The headphones start in the molding department and work their way through the wiring department, IT department, polishing department, and, finally, the packaging department. As well to these five production departments, there are two other non-production departments within this factory.

These two service departments are the canteen and the maintenance department. All employees who work in this factory have the benefit of eating at the subsidized canteen. The maintenance department is responsible for the general maintenance and repairing of the machinery within the whole factory. Handy currently makes 2,500 headphones. The forecast figures for the Handy Headphones for 2020 are as follows:

Factory rent	£140,000
Re-decorating of moulding department	£20,000
Electricity cost	£30,000
Depreciation of machinery	£5,000
Direct materials	£24,000
Direct labour – skilled workers	£20,000
Direct labour – unskilled workers	£26,000
Direct expenses	£10,000
Training for IT department staff	£6,500
Packaging department floor resurfacing	£3,000
New machinery for maintenance department	£23,500
Canteen redesign	£55,000

The departmental specifications are provided below:

Molding	Wiring	IT	Polishing	Packaging	Maintenance	Canteen	Total
Area (m²)	1,000	800	550	650	700	60	70	3,830
Machine value (£)	20,000	4,000	55,000	38,000	23,000	-	20,000	160,000
Number of staff	10	40	12	6	12	20	—	100

Practical task Use a spreadsheet to complete the following task: 1 You are a newly appointed cost accountant for Handy Headphones and you are curious to know what the total cost per headphone is working out at. You need to analyze the overhead costs, how they are allocated, apportioned and reapportioned as there may be some changes made by the management accountant based on your findings. The management accountant would also like to know how all these costs would be shown on the standard cost card.