Question 3 Smart Tools Limited is manufacturing company which uses two production departments (Machining and Finishing) to make its products. It also has two service departments (Canteen and Maintenance). Shown below are next year's budgeted manufacturing overhead costs and certain other additional data: Budgeted overheads E Rent and rates 374.000 Insurance and depreciation ofequipment 65,600 Heating and light 286,000 Maintenance department salary 18,230 Supervisors' salaries 184,500 Total overheads 928,330 Additional data: Machining Finishing Canteen Maintenance Book value of equipment (53) 240,000 80,000 - - Number of employees 20 16 5 4 Floor area (square meters) 1,820 1,300 1.1\" 936 Required: (a) (bi Allocate or apportion each of the production overheads to the four departments showing clearly the basis used for each production overhead. Show also the total allocation/apportionment for each department. Smart Tools Limited apportions service department costs to production departments using a method that fully recognises any work done by one service centre for another. What are the total overheads for the machining and nishing departments after the re-apportionment of all service department overheads? You are given the following additional information regarding budgeted production of the three products (A, B, C) made by Smart Tools Limited for the year: Soheila Malekpour, King's Business School Page 3 of 6 Product A Product B Product C Production 3,000 units 2,500 units 1,600 units Direct materials 6 per unit 8 per unit 9 per unit Direct labour: Machining Department 16 per unit 12 per unit 8 per unit Direct labour: Finishing Department 12 per unit 24 per unit 8 per unit Machine hours per unit 5 hours 4 hours 6 hours (C) (d) If) is) All direct labour is paid 8 per hour. All the machine hours take place in the machining department. Calculate the total number of budgeted machine hours to be used during the year to produce the full production of all 3 productsand use this, together with relevant information from your answer to part (b), to calculate an overhead absorption rate based on machine hours for the machining department (give your answer to 2 decimal places) Calculate an overhead absorption rate based on direct labour hours for the finishing department (give your answer to 2 decimal places) Using your answer to part (c) and (d) above calculate the budgeted manufacturing overhead cost per unit of Product A (give your answer to 2 decimal places) Calculate the total budgeted manufacturing cost per unit of product A (give your answer to 2 decimal places) Discuss the reasons why managers would want to know the full cost of their products