Question 3: Crawford Plc Crawford Plc manufactures book shelves. The company has two production cost centres: Assembly Department and Joinery Department, and one service cost centre: Canteen Department. The following information relates to the year ending 30 June 2020: Indirect costs: Total (E) Basis for allocation Indirect labour 28 000 Number of employees Indirect material 22 000 Direct materials Heating & lighting 13 000 Rent rates 14 000 Floor space Depreciation 19 000 Value of machinery used in each cost centre Supervision 15 000 Number of employees Power 9 000 Kilowatt hours Total 120 000 Floor space The following information is also available about each cost centre: Total Assembly Joinery Floor space (sq. meters) 8000 3 000 4 000 Book value of machinery (E) 93 000 50 000 40 000 Number of employees 25 12 10 Kilowatt hours of power 3 000 1500 1 300 Direct materials () 17 000 8 000 Direct labour (E) 8000 7 000 Maintenance hours 1 300 1 000 Labour hours 2 100 1 400 Canteen 1 000 3 000 3 200 Additional information: The canteen is used by both production cost centres. Canteen costs are allocated based on number of employees. (ii) During the year Crawford Plc produced a special product, Soft Stool. It took 4 hours of the Assembly time, and 6 hours in the Joinery Department to produce one unit of Soft Stool. The total direct material and direct labour costs amounted to 85 per unit of Soft Stool. Required: (a) Calculate an overhead cost rate based on labour hours for the: i. Assembling Department. ii. Joinery Department. (20 marks) (b) Calculate the total production costs of producing 10 units of Soft Stool. (6 marks) (c) Explain the advantages and disadvantages of using a single rate for absorbing overheads compared to departmental rates. (7 marks)