Question 5

The information below concerns the budgeted activity of Redstone Manufacturing Company Ltd for the coming year. There are two production departments (Milling and Packaging) and two service departments (Maintenance and Personnel).

	Milling	Packaging	Maintenance	Personnel
Indirect labour	120,000	140,000	50,000	30,000
Indirect Materials	24,000	32,000	6,000	20,000

Heating and lighting	24 000
Rent and rates	36 000
Depreciation	60,000
Supervision	48 000
Power	40,000

The following additional information is also available:

	Milling	Packaging	Maintenance	Personnel
Floor area in sq. metres	20,000	24 000	10,000	6 000
Book value of machinery ($)	150,000	120,000	20,000	10,000
Number of employees	50	40	10	20
Kilowatt hours	9,000	8,000	2,000	1,000
Maintenance hours	1,000	800	---	200

The Milling department is machine intensive, whereas the Packaging department is labour intensive. There are12,640 machine hours budgeted for the milling department and 15,700 labour hours are budgeted for the packaging department for the year ending 31 December 2018.

REQUIRED:

1. Prepare overhead analysis sheets showing the allocation and apportionment of overheads to the four cost centres on the following bases:

1. Repeat Distribution method
2. Simultaneous Equations method

1. Under both methods, calculate the overhead absorption rates for the two production departments.