Required:

a. Analyse the above indirect costs between the departments showing the bases of apportionment you have used.

b. Re-apportion the costs of the Service Department over the three (3) Production Departments using appropriate bases.

c. Calculate an Overhead Absorption Rate (OAR) for the production departments based on direct labour cost.

Mickel Ltd is a company that manufactures machine parts. The company has three (3) Production Departments and one (1) Service Department. The following information is for the year ended 31 December 2014. Dept. B $ 6 000 Dept.C $ 9 150 Service $ 3 350 Total $ 225 000 Dept. A $ Indirect Wages Other 4 000 Cost Storekeeping Rent Light and heat Power Depreciation Insurance: Plant 16 000 10 500 7 000 18 000 40 000 1 000 340 000 You ascertain the following information: Dept. A Dept. B Dept. Service 6 2501 $35 000 Area (m) Book Value of Plant No. of store requisitions Effective Horse Power Direct Labour Hours Direct Labour Cost Machine Hours 7 500 11 250 $70 000 $90 000 90 60 40 50 50 000 40 000 $25 000 $30 000 35 000 45 000 10 000 $ 5 000 50 5 110 000 $45 000 5 000 10 D