QUESTION 14 A furniture-making business produces quality furniture to customers' orders. It has two production departments Assembly and Finishing and one service department Maintenance. Next year's budgeted general overhead costs that need to be allocated between the three departments are: General Overhead Costs Machinery Insurance 10.000 Rent 28000 Catering Costs for employees 4.000 All three departments are housed in new premises. the details of which. together with other information. are given below: Departments: Assembly Finishing Maintenance Assigned overhead costs. specic to each department (E): Other information Floor area occupied (square metres) Machine value E 24 000 16.000 40. 000 Number of emlo ees Direct Labour hours budgeted for a year 7.500 9. 600 Reg uired (for even calculation clearly state your workings): (a) Apportion the general overhead costs (machinery insurance. rent and catering) between the three departments m then reallocate the cost of the service department to two production departments. Prepare a table showing the total overhead costs budgeted for each of the three departments. Explain the basis you selected to allocate the costs. (13 marks) Question 14 continued overleaf PTO Page?of11 BMANWSSZM Question 14 continued (b) Using the results from part (a) calculate manufacturing overhead rates for each production department based on direct labour hours and deduce the full costs for a specially designed sofa which is to be made for a customer based on the following information. Assembly Department Finishing Department 160.00 mm. Direct Labour hours Direct Labour rate 12 - -r hour 14 - -r hour (7 marks) (c) Normally furniture making process requires upholstering. painting. assembling and accessory's tting. The company's manager has heard of a new way of overhead costs allocation that uses costs pools and cost drivers. called Activity Based Costing. He became interested because from his experience he knows that different orders consume different amount of resources. (c) Normally furniture making process requires upholstering, painting, assembling and accessory's fitting. The company's manager has heard of a new way of overhead costs allocation that uses costs pools and cost drivers, called Activity Based Costing. He became interested because from his experience he knows that different orders consume different amount of resources. He estimated that in the following year the total overhead costs will be $50,000, which he allocated to two cost pools: $40,000 to the first cost pool in relation to setting up equipment activities and f10,000 to the second cost pool in relation to material purchase activities. He also assembled the following information in relation to the cost drivers: Equipment Set-up cost Material purchases pool cost pool Total quantity per year 2,500 equipment set-ups 800 purchases Assuming that the order requires 7 different set-ups of equipment and placing of 4 purchase orders, calculate the amount of overhead costs allocated to the order. (5 marks) (Total of 25 marks)