uestion 1

Bakewell Limited has been in business for many years producing cakes and other baked products for the retail and food service market. The company has two production departments and one service department. The traditional costing method is used to apportion general overheads using labour hours for the mixing department and machine hours for the baking department. The following information is available in relation to the companys different departments.

Production

Service Canteen 1,000

2m2 2,500

Indirect Labour Hours Floor Space Machine Values Number employees

Mixing Dept

10,000

20m2 20,000

Baking Dept

5,000

40m2 30,000

10 The company had the following overheads in the year ended 2015:-

20

2

Indirect Labour Rent Machine Maintenance

150,000 50,000 100,000

The company produces three products with the following associated labour hours per unit, machine hours per unit and volumes produced/sold per annum:

Labour Hours per unit in the Mixing Department Machine Hours per unit in the Baking Department Units Produced/Sold

Apple Cupcakes Tarts

0.25 0.50

0.50 1.00 200,000 100,000

Chocolate Biscuit Cake 1.00

1.00 20,000

In addition to overheads each product has the following associated costs.

Direct Materials Direct Labour

Cupcakes

0.50 0.25

Apple Tarts

0.50 0.25

Chocolate Biscuit Cake 0.75 0.40

9

Required:

1. (a) Using the above information calculate a pre-determined OAR per labour hour and machine hour for each of the two production departments

   (15 Marks)