Question $2$

The Sayther Company manufactures and sells two products, A and B$.$ The manufacturing activity is organized in two departments. Manufacturing overhead costs at its Portland Plant are allocated to each product using a plantwide rate of R$17$ per direct manufacturing labour hour. This rate is based on budgeted manufacturing overhead of R$340000$ and $20000$ budgeted manufacturing labour hours.

$\backslash$table$[[$Man$,\backslash$table$[[$Budgeted$],[$Manufacturing$],[$Overhead$]],\backslash$table$[[$Budgeted Direct$],[$Manufacturing$],[$Labour Hours$]]],[1,$R$240000,10000],[2,$R$100000,10000],[$Total$,$R$340000,20000]]$

The number of manufacturing labour hours required to manufacture each product is:

$\backslash$table$[[$Manufacturing Department Product A Product B$,,],[1,4,1],[2,1,4],[$Total$,5,5]]$

Per$-$unit costs for the two categories of direct manufacturing costs are:

Direct Manufacturing Costs Product A Product B

Direct materials $R120R150$

Direct manufacturing labour $R80,R80$

At the end of the year, there was no work in process. There were $200$ finished units of Product A and $600$ finished units of Product $B$ on hand. Assume that the budgeted production level of the Portland plant was exactly attained.

Sayther sets the selling price of each product by adding $120\%$ to its manufacturing costs; that is if the unit manufacturing costs are R$100,$ the selling price is R$220.$ This $120\%$ markup is designed to cover upstream manufacturing costs $(R$ & $D$ and design$)$ and costs downstream from manufacturing $($marketing$,$ distribution and customer service$),$ as well as to provide a profit.

Required:

$2\mathrm{.}1$ How much manufacturing overhead cost would be included in the inventory of products A and $B$ if Sayther used:

a$.$ A plantwide overhead rate

b$.$ Department overhead rate

$2\mathrm{.}2$ By how much would the selling price of product A and $B$ differ is Sayther used a plantwide overhead rate instead of departmental overhead rates?

$2\mathrm{.}3$ Under what conditions should Sayther Company further subdivide the department costs pools into