The company has three production centres: Machine shop, Welding shop and

Assembly shop and two supporting centres: Maintenance and Powerhouse.

Sinker Ltd appointed a cost consultant, Adriel, to look into the feasibility of introducing

a new grade sink in the market. Adriel has asked the cost accountant of the company,

Billy, to present him with the relevant information.

The accountant has forecasted sales of Grade E sink to be 4,000 units in the coming

year. It is estimated that each unit will take 9 machine hours in Machine shop, 2 direct

labour hours in Welding shop and 2 direct labour hours in Assembly shop. The direct

material cost to produce each unit of Grade E sink will take RM7. The labour rate per

hour: Welding shop RM3 and Assembly shop RM3. In the Machine shop 2 hours per

unit will be worked by machine operators. The rate of pay is RM6.50 per hour.

The cost accountant has presented an extract of the coming year's budget:

Grade P Grade S

Production units 3,000 6,000

Machine hours per unit 6 5

Direct labour hours per unit:

Welding shop 1,5 2.5

Assembly shop 3 4

It is estimated that the apportioned overheads after the application of the repeated

distribution method of apportionment for Machina shop will be RM189,000. Welding

shop RM96,250 and Assembly shop RM82,000.

What would consultant Adriel's advice be to Sinker Ltd.