PMA0064 ESSENTIALS OF MANAGEMENT ACCOUNTING IS OCTOBER 2009 Question 1 The following is the estimated cost for Alam Ltd. There are two production departments namely Assembly and Machine Shop and two service departments namely Finishing and Store. Total Assembly Machine Finishing Store RM Shop RM RM Direct material cost 8.000 7,000 2.000 1,000 Indirect material 30,000 40,000 20,000 10,000 Indirect labour 12,000 15,000 3,000 10,000 Electricity 120,000 Insurance of 140,000 Machines Insurance of Factory 80,000 Salaries 200,000 RM Additional information: Assembly Machine Finishing Store Shop RM RM RM RM Floor area (square meters) 4,800 6,400 1.600 3.200 Number of employees 100 60 30 10 Kilowatt hours 20,000 30,000 2,000 8,000 Value of Machines(RM) 80,000 200.000 100,000 20,000 Machine hours 15,000 20,000 Labour hours 60,000 20,000 Service hours 6,000 4,000 Store supports the three departments based on proportions 50% (assembly): 30% (machine shop): 20% (Finishing). Finishing services the two production departments based on service hours Required a) Calculate overhead absorption rates (OAR) for the production departments using the following bases of apportionment: 1) Rate per labour hour for Assembly ii) Rate per machine hour for Machine shop