Slime Company has two support departments, administration and maintenance, and two production departments, mixing and colouring. Budgeted costs and normal activity levels are as follows: Support Departments Production Departments Administration Maintenance Mixing Colouring Overhead costs $12,500 $60,000 $80,000 $100,000 Number of employees 5 10 40 10 Kilowatt-hours 20,000 40,000 60,000 80,000 Machine hours 5,000 32,000 20,000 Direct labour hours 1,000 2,000 20,000 40,000 The overhead costs of the administration department are allocated based on number of employees, and the overhead costs of the maintenance department are allocated based on kilowatt-hours. The mixing department uses machine hours to assign overhead costs to products and colouring department uses direct labour hours. One of the products the company produces, Blue Slime, requires 2 machine hours per unit in the mixing department and 4 direct labour hours per unit in the colouring department. Prime cost for Blue Slime per unit is $6. Usually, Slime Company prices its products at full production cost plus 220% as profit margin. Required: 1. 2. 3. Using the sequential (step) method, allocate the budgeted overhead costs of the support departments to the production departments (allocate maintenance costs first). Calculate production department mixing's predetermined overhead application rate (round the calculated amount to two decimal places). Calculate production department colouring's predetermined overhead application rate (round the calculated amount to two decimal places). If Slime Company followed its usual pricing policy, calculate the selling price of Blue Slime (round the calculated amount to two decimal places). Which method (the direct method or sequential method) should Slime Company use to more accurately reflect the cost of producing Blue Slime? Explain why? 4. 5