Lilbette Ltd produces ornaments. The product has to go through two processing departments which are Drilling and Forming. Two service cost centers involved are Store and Maintenance.

Below are the overhead costs:

Lighting $18,000

Depreciation on machineries 25,000

Supervision 48,000

Electric power 15,500

Premise rental 50,000

Insurance on machineries 20,500

The following additional information is available:

	Direct material	Indirect material	Direct Labour	Indirect labour
Drilling	52,000	23,000	64,000	22,000
Forming	32,000	18,000	24,000	21,000
Store	-	-	-	12,000
Maintenance	-	-	-	18,000

	Drilling	Forming	Store	Maintenance
No. of employees	30	15	20	25
Kilowatt hours	300	320	250	130
Premise value	75,500	48,500	12,500	8,500
No. of material requisition	2500	2500	-	-
Floor area	4000	2500	1000	500
Value of machinery	23000	27000	-	-
Maintenance hours	500	800	-	-
Direct labour hours	2500	1200	-	-
Machine hours	1000	1800	-	-

REQUIRED:

(I) Illustrate the overhead analysis by showing clearly the primary and secondary apportionment of the overhead costs incurred by each department in Lilbete Ltd.

(All calculations to be rounded to the nearest $)

(16 marks)

(Ii.) Estimate the Overhead Absorption Rates (OAR) for Drilling and Forming departments using machine hours and direct labour hours, respectively.

(All calculations to be rounded to two decimal places)

(2 marks)

iii. Lilbette Ltd has accepted an order of 100 units of the same ornaments. The order is identified as Job No. TL-90. Details pertaining to the job are as follows:

Direct material $6,800

Direct labour:

Drilling department 30 hours @ $15 per hour

Forming department 40 hours @ $25 per hour

Direct expenses $850

Machine hours:

Drilling department 15 hours

Forming department 20 hours

Selling and administrative overhead is 10% of the factory cost.

Profit margin is 35% of the total cost.

Find the selling price for Job No. TL-90 by clearly indicating the prime costs, production costs and total costs. Use your answer in

(ii) above as the estimated overhead absorption rate (OAR) to calculate the overhead absorbed to the job.