Required:
a. Calculate appropriate overhead absorption rates for each production department based on Machine Hours. (7 marks) Please provide justification and workings
b. What is the difference between variable and fixed costs; and Relevant & Irrelevant Costs (3 mark)

Q1. ahmad manufactures a range of office equipment in three separate production departments. Material stores and Maintenance are supporting department. Materials are first shaped in the Cutting Department, then machined ready for the various fixings before final assembly. The following budgeted and statistical information exists concerning Fullcost Ltd. for the year ended 28 February 2020. 1 Departments Maintenance il Total Cutting Material Machini Assembl Mainter stores ng ly nance! SAR SAR SAR SAR SAR SAR SAR 100,000 Net Book Value of Assets 4 S 3,150 15,750 4,200 14,000 5,000 15,000 12,500 11,500 18,250 12,500 7,850 6 7 8 Number of Employees 120,000 % usage of electricity 160,000 Floor area (sq metres) 12,000 Assets 35 000 25 000 Floor area (so metres 2 3 Costs+A3:H27 Depreciation Consumables Indirect wages Electricity Rent Insurance 9 10 Canteen 11 Lighting Technical data 12 Floor area (sq metres) 13 14 % usage of electricity 15 Number of material issues 16 Number of maintenance jobs! 17 Number of maintenance jobs Il 18 Labour hours Machine hours Number of Employees 21 Assets 22 Net Book Value of Assets 250 150 250 100 50 40 5 50 20 20 5 5 3 600 100 150 125 300 255 50 50 35 150 65 35 9,000 8,000 75 6,000 5,000 19 10,000 11,000 55 50 5 10 9 20 200.000 275,000 300,000 50,000 180000 185,000 210,000 39,000 45,000 43,000 45,000 37.500 Q1. ahmad manufactures a range of office equipment in three separate production departments. Material stores and Maintenance are supporting department. Materials are first shaped in the Cutting Department, then machined ready for the various fixings before final assembly. The following budgeted and statistical information exists concerning Fullcost Ltd. for the year ended 28 February 2020. 1 Departments Maintenance il Total Cutting Material Machini Assembl Mainter stores ng ly nance! SAR SAR SAR SAR SAR SAR SAR 100,000 Net Book Value of Assets 4 S 3,150 15,750 4,200 14,000 5,000 15,000 12,500 11,500 18,250 12,500 7,850 6 7 8 Number of Employees 120,000 % usage of electricity 160,000 Floor area (sq metres) 12,000 Assets 35 000 25 000 Floor area (so metres 2 3 Costs+A3:H27 Depreciation Consumables Indirect wages Electricity Rent Insurance 9 10 Canteen 11 Lighting Technical data 12 Floor area (sq metres) 13 14 % usage of electricity 15 Number of material issues 16 Number of maintenance jobs! 17 Number of maintenance jobs Il 18 Labour hours Machine hours Number of Employees 21 Assets 22 Net Book Value of Assets 250 150 250 100 50 40 5 50 20 20 5 5 3 600 100 150 125 300 255 50 50 35 150 65 35 9,000 8,000 75 6,000 5,000 19 10,000 11,000 55 50 5 10 9 20 200.000 275,000 300,000 50,000 180000 185,000 210,000 39,000 45,000 43,000 45,000 37.500