The overhead absorption rate (application rate) for each department is based on the below budgeted data. Robin uses the absorption rates to charge the manufacturing overheads to the product Jay. Details of the budgeted information are:

Department1 Department 2

Overheads $100000 $180000

Direct labour hours 10000 3600

Machine hours 2000 45,000

Simon, a new customer, places a special order for 500 units of product Jay with Robin. The following information relates to the manufacture of product Jay.

Direct material 50 kilos at $2 per kilo

Direct labour Department 1 5 hours at $12 per hour

Department 2 2 hours at $15 per hour

Machine hours - Deparment 2 only 6 hours

Robin marks up the cost of a special order by 100% to calculate the quote on product Jay.

Required

1. Calculate a suitable overhead absorption rates for each department. Justify your answer.

1. Prepare a quote for Simon for the special order
2. If Simon offers to pay Robin $350 for the special order, advice Robin whether the special order should be accepted. Assume that at present the factory is not operating at full capacity.