Question 5 [25 marks] Longling Limited is a manufacturing company which operates a traditional/conventional overhead costing system. It has two departments, each of which is a cost centre. The Machining department prepares products for subsequent assembly in the Assembly department. The Machining department absorbs its departmental manufacturing overheads using machine hours, and the Assembly department absorbs its departmental manufacturing overheads using direct labour hours. The budgeted information for next year (commencing on 1St January 2021) is detailed below. Manufacturin- item Amount or cuantit Additional information Heating and lighting 50,000 Both departments occupy the same area of space in the company's building. Machine power 20,000 There are no machines in the assembly department. Direct labour 400,000 - Machining department receives 25% of this cost, and Assembly department the rest. - Direct labour employees are paid 10 per hour. Indirect labour 100,000 Machining depaltment receives 25% of this cost, and Assembly department the rest. Direct materials 240,000 Machining department receives 100% of this cost. Machine depreciation 60,000 There are no machines in the assembly department. Machine time 40,000 machine hours There are no machines in the assembly department. Required a) Required For each of the Machining department and Assembly department calculate the overhead absorption rate. (The overhead absorption rate is also known as the overhead recovery rate.) Calculate each overhead absorption rate to one decimal place. Show your workings. [7 marks] b) The directors of Longling Limited have been informed that traditional/conventional overhead costing systems may have some limitations. They have been advised an activity-based costing (ABC) system may be more beneficial to the company. Required Advise the directors of Longling Limited regarding: i) The limitations of traditional/conventional overhead costing systems. ii) The potential advantages of replacing a traditional/conventional overhead costing system with an ABC system. iii) The challenges associated with designing and implementing an ABC system. [18 marks]