Shown below are next years budgeted operating costs for Fibre Ltd, a company with three production and twoservice departments.

Production departments Service departments Total

	Weaving dept	Proofing dept	Finishing dept	Personnel	Mainte- nance
	$000	$000	$000	$000	$000	$000
Direct wages	2,500	5,500	2,000			10,000
Direct materials	7,000	2,000	1,500			10,500
Indirect materials and wages	1,100	900	300	1,500	3,800	7,600
Power	5,200	1,000	200	100	800	7,300
Rent and rates	1,600	3,600	800	1,600	400	8,000
Factory supervision	2,400	4,000	1,600	400	1,600	10,000
Machine insurance	1,600	400	400	-	-	2,400

Additional data extracted from next years budget are shown below:

	Weaving Proofingdept dept	Finishingdept	Personnel	Mainte-nance	Total
Floor area m3	12,000 27,000	6,000	12,000	3,000	60,000
Machine hours	1,600,000 400,000	400,000			2,400,000
Direct labour hours	1,200,000 1,800,000	600,000			3,600,000
Number of employees	600 1,000	400	100	400	2,500
Net book value of equipment	$4.0m $1.0m	$1.0m			$6.0m
Required:

Calculate the total overhead to be absorbed by each production department using the step-down method of apportioning service departmentcosts. (14 marks)

Determine the budgeted overhead absorption rates for each production department using the following methods:

A machine hour rate in the weaving department

A direct labour hour rate in the proofing department

Another suitable method in the finishing department.

All workings and assumptions should be clearly shown.