Question 3 The Melrose Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis for Department A and on a machine hour basis for Department B. At the beginning of 2018 the company made the following predictions: Department A Department B Direct Labour Cost E128,000 E35,000 Factory Overhead (144,000 E150,000 Direct Labour Hours 16,000 5,000 Machine Hours 1,000 20,000 Required: 1. What is the predetermined overhead rate that should be used in both Department A and Department B? (4 Marks) 2. During the month of January the costs sheet for production order No. 200 shows the following: Department A Department B Materials requisitioned E20 E40 Direct Labour Costs E32 E21 Direct Labour Hours 4 3 Machine Hours 1 13 What is the total production cost of production order 200? (6 marks) 3. Assuming that production order No 200 consists of 20 units of product, what is the unit cost of the order No 200? (3 Marks) 4. If the company used Direct Labour Hour basis to absorb overheads for both Departments A and B re-calculate the production cost and unit cost of order 200. (8 Marks) 5. What should the criteria be for choosing the basis of absorbing overheads into production costs? (4marks)