Himilton Limited has budgeted for the following production overheads for its production and service cost centres for the year ending 30 June 2010: Cost centre K000 Machining 360 Assembly 320 Paint shop 260 Maintenance shop (Service) 168 Stores (service) 104 Canteen (service) 150 The product passes through the machining, assembly and paint shop cost centers and the following data relates to the cost centers. Machining Assembly Paint Shop Maintenance Store No. of employees 162 102 78 60 48 Maintenance service Hours 36 000 24 000 20 000 - - Stores (orders) 360 270 180 90 - The following budgeted data relates to the production cost centers: Machining Assembly Paint Shop Labour cost K80 000 K176 000 K90 000 Labour hours 16 000 22 500 18 000 Machine hours 18 400 16 200 13 200 Required: (i) Apportion the production overhead costs of the service cost centers to the production cost centers and calculate the predetermined overhead absorption rate for the three (3) production cost centers on the following basis: Machinery machine hours Assembly labour hours Paint shop labour costs (ii) Actual results for the production cost centers were: Machining Assembly Paint shop Actual overhead K580 000 K334 000 K310 000 Labour hours 9 000 15 600 13 800 Labour cost K50 000 K84 000 K70 000 Machine hours 20 000 16 400 13 200 Prepare a statement showing the under/over assumption per cost centre for the year ending 30 June 2010. (iii) Briefly explain why overheads need to be absorbed using pre-determined bases.