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SI S2 10 BLUELINE Ltd manufactures many different products which pass through two production cost centres (P1 and P2). There are also two service cost
SI S2 10 BLUELINE Ltd manufactures many different products which pass through two production cost centres (P1 and P2). There are also two service cost centres (S1 and S2) in the factory. The following information has been extracted from the budget for the coming year: COST CENTRES PIP2 Allocated and apportioned production overheads K477,550 K404,250 K132,000 K96,000 Number of employees A 65 15 Total direct labour hours 68,000 11,400 Total machine hours 4,000 14,000 Service cost centre S1 costs are reapportioned to all other cost centres based on the number of employees. Service cost centre S2 only does work for P1 and P2 and its costs are reapportioned to these centres in the ratio 5 to 3 respectively. Required: (a) Calculate ) the machine hour absorption rate for cost centre P1, and (1) the direct labour hour absorption rate for cost centre P2. [6 Marks] (b) Explain the difference between production overheads that have been allocated' and those which have been apportioned' to cost centres [2 marks] (c) Explain why some manufacturing companies are able to allocate electric power costs to production cost centres, whereas others can only apportion them. [2 Marks [TOTAL: 10 MARKS]
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