Katondo Ltd uses a job costing system at its Mukobeko, Kabwe plant. The plant has a machining department and a finishing department. Katondo Ltd uses normal costing with two direct-cost categories (direct materials and direct manufacturing labour) and two manufacturing overhead cost pools (the machining department with machine hours as the allocation base, and the finishing department with direct manufacturing labour costs as the allocation base). The 2021 budget for the plant is as follows:

Machining Finishing

Department Department

K000 K000

Manufacturing Overhead cost 21 320 14 754

Direct manufacturing labour cost 1 880 7 600

Direct manufacturing labour hours (lh) 72 000 lh 290 000 lh

Machine hours (mh) 410 000 mh 64 000 mh

Required

1. To prepare an overview diagram depicting the job-costing system in Katondo Ltd.
2. To compute the budgeted manufacturing overhead rate in:

• The machine department
• The finishing department

3. During the month of January 2021, the job-cost record for job XYZ shows the following:

Machining Finishing

Department Department

K000 K000

Direct material used 31 000 10 000

Direct manufacturing labour cost 800 2 2000

Direct manufacturing labour hours 100 lh 100 lh

Machine hours 260 mh 40 mh

Compute the total manufacturing overhead cost allocated to job XYZ.

4. Assuming that job XYZ consisted of 400 units of product, compute the cost per unit?
5. The following amounts were obtained at the end of 2021:

Machining Finishing

Department Department

K000 K000

Manufacturing Overhead incurred 22 140 16 472

Direct manufacturing labour cost 2 000 8 800

Machine hours (mh) 420 mh 62 mh

Compute the under-over allocated manufacturing overhead for each department for the Mukobeko plant as a whole.

6. Explain why Katondo Ltd uses two different manufacturing overhead cost pools in its job costing system.