Question 2 Shown belowest year's budget for the forming and finishing departments of foon on the departments manufacture three different types of component which are incorporated into the output of the firm's finished products Components . Production units 34000 10000 Prime cost (unit) Direct material Forming dept Direct labore Forming dept Finishing det A Manufacturing Thours/unit Machining Forming dept Direct labore Forming dept Finishing dept 2 10 Variable overheads Foed overhead Formindest 200.900 02.00 ED 115.500 231.000 98000 hours Machine time required and available Labour hours required and available 12000 hours The forming department is mechanized and employs only one grade of labour, the finishing department employs several grades of labour with differing hourly rates of gay You are required Calculate sultable overhead absorption rates for the forming and finishing departments for et year and include a brief explanation for your choice of rates Another firm has offered to supply next year's budemedies of the above components the following prices Component 030 Components E65 Component 60 Advise management whether it would be more economical to purchase of the above components from the outside supplier. You must show your working and considering contre only clearly state any assumption made or any aspects that may require further investigation (a) Calculate suitable overhead absorption rates for the forming and finishing departments for next year and include a brief explanation for your choice of rates. (10 marks) (b) Another firm has offered to supply next year's budgeted quantities of the above components at the following prices: Component A 30 Component B 65 Component 60 Advise management whether it would be more economical to purchase any of the above components from the outside supplier. You must show your workings and, considering cost criteria only, clearly state any assumptions made or any aspects that may require further investigation. (20 marks) c) Critically consider the purpose of calculating production overhead absorption rates. (No of words required between 150 to 180) (20 Marks)