Question 1 Bookdon plc manufactures three products in two production departments, a machine shop and a fitting section; it also has two service departments, a canteen and a machine maintenance section. Shown below are next year's budgeted production data and manufacturing costs for the company. Production Product X Product Product Y 4200 units 6900 units Z 1700 units Prime costs: Direct materials N$11 per unit N$4 per unit N$17 per unit Direct labour: Machine shop N$6 per unit N$4 por unit Fitting section N$12 per unit N$3 per unit N$2 per unit NS21 per unit Machine hours per unit 6 hrs. per unit 3 hrs. per unit 4 hrs. per unit Machine Fitting Canteen Machine Total Shop section Maintenance Budgeted overheard (NS) Allocated overheads 27,660 19,470 16,000 26,650 90,380 Rent, Rate, heat & light 17,000 Depreciation and insurance Of equipment 25,000 Additional data: Book value of equipment 150,000 75,000 30,000 45,000 Number of employees 18 14 4 4 Floor space occupied (Square metres) 3,600 1,400 1,000 800 It has been estimated that approximately 70 per cent of the machine maintenance section's costs are incurred servicing the machine shop and the remainder incurred servicing the fitting section. Required a) (i) calculate the following budgeted overhead absorption rates: . A machine hour rate for the machine shop. A rate expressed as a percentage of direct wages for the fitting section. All workings and assumptions should be clearly shown. [15 Marks] ii) Calculate the budgeted manufacturing overhead cost per unit of product X. b) [2 Marks] The production director of Bookdon plc has suggested that as the actual overheads incurred and unit produced are usually different from the budgeted and as a consequence profits of each month end are distorted by over/under absorbed overheads, it would be more accurate to calculate the actual overhead cost per unit each month end by dividing the total number of all units actually produced during the month into the actual overheads incurred. Critically examine the production director's suggestion. [8 Marks] [Total 25 Marks]