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XYZ is a business with two production departments and one service department Table 1 sets out the indirect costs incurred by the business on behalf
XYZ is a business with two production departments and one service department Table 1 sets out the indirect costs incurred by the business on behalf of all departments because there is insufficient information to permit allocation of costs as a whole. Table 2 sets out relevant information about each department which will be used in the process of determining an overhead cost rate Table1 Indirect costs incurred by the business Cost Item Total cost this month Indirect materials Indirect labour Rent Machine insurance Depreciation Total 36,000 40,000 1,000 1,600 2,000 80,600 Table 2 Information about each department Assembly|Finishing Maintenance Direct materials used for 400,000 500,000 Not applicable roduction Number of emplovees Floor area Value of machiner Number of direct labour hours 55.000 worked on production 25 300 sa ft 600 sg ft 300 sa ft 20,000 30,000 50,000 64,000 Not applicable The maintenance department provides service in proportion to the machinery used in each department
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