Mickel Ltd is a company that manufactures machine parts. The company has three (3) Production Departments and one (1) Service Department. The following information is for the year ended 31 December 2014.

	Dept. A	Dept. B	Dept. C	Service	Total
	$	$	$	$	$
Indirect Wages Other Cost	4 000	6 000	9 150	3 350	225 000
Storekeeping					16 000
Rent					10 500
Light and heat					7 000
Power					18 000
Depreciation					40 000
Insurance: Plant					1 000
					340 000

You ascertain the following information:

Dept. A Dept. B Dept. C Service

Area (m2) 7 500	11 250 10 000 6 250
Book Value of Plant $70 000	$90 000 $ 5 000 $35 000
No. of store requisitions 90	60 50 --
Effective Horse Power 40	50 5 10
Direct Labour Hours 50 000	40 000 110 000 --
Direct Labour Cost $25 000	$30 000 $ 45 000 --
Machine Hours 35 000	45 000 5 000 --

Required:

a. Analyse the above indirect costs between the departments showing the bases of apportionment you have used.

b. Re-apportion the costs of the Service Department over the three (3) Production Departments using appropriate bases.

c. Calculate an Overhead Absorption Rate (OAR) for the production departments based on direct labour cost.