IM3.6 Intermediate: Computation of three different overhead absorption rates and a cost-plus selling price. A manufacturing company has prepared the following budgeted information for the forthcoming year: During March the mor (i) that the actua Machining 600 Hand finishing (ii) that the actu ually to each Direct material Direct labour Direct expenses Production overhead Administrative overhead Budgeted activity levels include: 800000 200000 40 000 600000 328 000 (9 ning Hand finishing ich take 9 direc chine hours in Budgeted production units Machine hours Labour hours 600000 50000 40000 (ii) that the actu Required: (a) Calculate app It has recently spent heavily on advanced technological machinery and reduced its workforce. As a consequence it is thinking about changing its basis for overhead absorption from a percentage of direct labour cost to either a machine hour or labour hour basis. The administrative overhead is to be absorbed as a percentage of factory cost. Required: undation Paper 3 the year ende Calc each Icalculation of and sleeping The principal abs erial in the (a) Prepare pre-determined overhead absorption rates for production overheads based upon the three different bases either the tent o 31 July cost are budgeted as actu for absorption mentioned above overhead absorption rate the organization should use giving reasons for your (c) State the rea (b) Outline the reasons for calculating a pre-determined companies. (c) Select the overhead absorption rate that you think decision (3 marks) canteen tenace (d) The company has been asked to price job AX, this job requires the following Direct material Direct labour Direct expenses Machine hours Labour hours IM3.8 Intermediate verheads. A comp the two production c are concemed with f departments, maint 15000 45000 18 700 24 200 3400 5000 3788 1100 422 Predetermined o hours, are establish budgeted expenditu ended, including the overheads, was Budgeted direct lab 10 250 for sealing. Service department 220 Compute the price for this job using the absorption rate selected in (c) above, given that the company profit margin is equal to 10 per cent of the price (6 marks) (e) The company previously paid its direct labour workers upon 2500 1000 a time basis but is now contemplating moving over to an incentive scheme Required Draft a memo to the Chief Accountant outlining the general characteristics and advantages of employing a successful incentive scheme. Maintenance Maintenance Maintenance 8 Canteen AAT Cost Accounting and Budgeting 3.7 Intermediate: Calculation of overhead absorption rates and der/over-recovery of overheads, BEC Limited operates an During the period ju