- Field: Business Finance - Accounting
Question 3 Lewitt PLC has asked for your help in designing their new costing system. You have ascertained that they have two direct production departments: manufacturing and finishing, and two production overhead departments: stores and canteen. The allocated costs in the period are budgeted to be: Manufacturing £360,000 Stores £120,000 Finishing £320,000 Canteen £30,000 Costs to be apportioned: Rent on basis of floor area £26,000 Machine depreciation on basis of original cost of machinery £60,000 Management time on basis of time spent in each dept. £120,000 Floor Area Machinery Management Sq mtrs Original cost Time Manufacturing 300 £450,000 48% Finishing 100 £30,000 32% Stores 50 £5,000 5% Canteen 70 £15,000 15% Stores Number of Requisitions Employees Manufacturing 150 35 Finishing 10 25 Stores N/A N/A Canteen 40 N/A Budgeted machine hours in manufacturing department is 25,183 Budgeted direct labour hours in finishing department is 27,095 Required: Calculate the overhead absorption rate for the manufacturing and finishing departments.