The production manager of Grim (Pty) Ltd has recently attended a management course where the advantages of variance analysis were discussed. He feels such an analysis would assist in solving problems of budgetary control that arose during the year. The following information relates to the past years (year ending 31 May 2022) activities:

Actual manufacturing overheads N$175 000.00 Actual direct labour hours 25 000 hours Budgeted manufacturing overheads N$125 000.00 Actual sales N$600 000.00 Budgeted direct labour hours 20 000 hours Actual profit for the year N$185 000.00

The following overheads have been budgeted for and must be allocated to the production and service departments. Rent of factory building N$120 000.00 Electricity N$ 76 500.00 Insurance on machinery N$ 60 000.00 Protective clothing N$ 24 000.00 Secondary allocation is done on the basis of direct labour hours. The following statistics is available:

a) Draw up an overhead statement and show the primary as well as the secondary allocations. b) Calculate the absorption rate per department using labour hours as basis.

\begin{tabular}{|l|c|c|c|} \hline & Department A & Department B & Service Department \\ \hline Number of employees & 35 & 20 & 5 \\ \hline Floor space & 500m2 & 400m2 & 100m2 \\ \hline Value of machinery & N$500000.00 & N$800000.00 & N$200000.00 \\ \hline Kilowatt hours & 400 & 400 & 50 \\ \hline Labour hours & 400 & 225 & 95 \\ \hline \end{tabular}