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p26 e Rs. Departmental Overhead Distribution Summary X Y Z Rs. Rs. Rs. Rs. Total (given) 7,810 12,543 4,547 4,000 Exp. of P Dept. Rs. 4,612 1,384 1.845 922 (-4,612) Exp. of Deptt Q Rs. 3,061 306 612 1,531 612 9,500 15,000 7,000 Estimated Working Hours 1,000 2,500 1,400 Rate Per Hour Rs. 6.00 5.00 2.600 461 (-3,061) 9.50 Illustration: 7 RST Ltd. produces machine parts on a job order basis. Most of the business is obtained through bidding. Most of the firms competing with RST Ltd. bid full cost plus a 20% markup. Recently, with the expectation of gaining more sales, RST Ltd. reduced its markup from 25% to 20%. The company operates two service departments and two producing departments. The budgeted costs and the normal levels of activity for each department are given below : Particulars Service Department Production Department B D Overhead Costs Number of Employees Maintenance Hours Machine Hours Labour Hours 5,00,000 40 10,000 10,00,000 35 1,000 5,00,000 150 32,000 50,000 5,000 2,50.000 150 8,000 5,000 50.000 The direct costs of Department A are allocated on the basis of employees; those of Department B are allocated on the basis of maintenance hours. Departmental overhead rates are used to assign costs to products. Department Cuses machine hours, and Department Duses labour hours. The firm is preparing to on a job (job Z) that requires three machine hours per unit produced in Department C and no time in Department D. The expected prime cost per unit is Rs. 85. Required (1) Allocate the service costs to the production departments using the direct method. (2) What will be the bid for Job Z, if the direct method of allocation is used? (3) Allocate the service costs to the production departments using the Sequential or Repeated Method. (4) What will be the bid for Job Z, if the Sequential Method is used? (5) Allocate the service costs to the production departments using the Reciprocal Method. (6) What will be the bid for Job Z, if the Reciprocal Method is used