Question 1

Overhead allocation rate (expressed to the nearest cent) of each of the two production departments.

(16 marks)

Overheads applied to each unit of the product. (4 marks)

INFORMATION

Saffron Ltd gathered the following statistics to allocate their overheads amongst three different departments:

	Production Department X	Production Department Y	Service Department M
Materials used	R600 000	R480 000	R120 000
Number of employees	825	375	300
Direct labour hours	26 000	13 000	11 000
Plant and equipment at cost	R260 000	R150 000	R90 000
Machine hours	9 520	4 080	2 400
Floor area in square metres	13 000	4 400	2 600

The budgeted overheads for 2023 are as follows:
	R
Municipal rates	60 000
Depreciation on plant and equipment	30 000
Electricity	30 000
Cafeteria	26 000
Insurance: Buildings	32 000
Insurance: Plant and equipment	50 000
Rest room	24 000

- The secondary apportionment of Service Department M takes place according to machine hours.

- Overhead allocation rates are based on labour hours.

- The product spends 10 labour hours in the Department X and 5 labour hours in the Department Y.