You ascertain the following information:

Dept. A Dept. B Dept. C Service Area

(m2) 7 500 11 250 10 000 6 250

Book Value of Plant $70 000 $90 000 $ 5 000 $35 000

No. of store requisitions 90 60 50 --

Effective Horse Power 40 50 5 10

Direct Labour Hours 50 000 40 000 110 000 --

Direct Labour Cost $25 000 $30 000 $ 45 000 --

Machine Hours 35 000 45 000 5 000 --

Required:

a. Analyse the above indirect costs between the departments showing the bases of apportionment you have used.

b. Re-apportion the costs of the Service Department over the three (3) Production Departments using appropriate bases.

c. Calculate an Overhead Absorption Rate (OAR) for the production departments based on direct labour cost.