Folly Limited produces novelty products. The products are produced on machines in the manufacturing department and they are then hand painted and finished in the finishing department. Folly Limited has forecast the following indirect production overheads for the year ended 31 January 2020:

* The canteen is in a separate building. The canteen rent, rates, heating, lighting, insurance and staff costs are all included in the figure for canteen expenses.

The manufacturing department has a capacity of 96,000 machine hours and 2,000 labour hours. The painting and finishing department has a capacity of 4,000 machine hours and 80,000 labour hours.

Required

(a) Using the information provided, calculate the total production overheads to be allocated to the manufacturing and painting and finishing departments.

(b) Calculate the most appropriate overhead recovery/absorption rate for the manufacturing and painting and finishing departments and justify your choice of machine or labour hours as an absorption basis for the two departments.

(c) Using the rates you have calculated in (b), calculate the cost of the following job:

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£000 Machinery maintenance staff salaries (manufacturing department) 100 Employees' salaries (painting and finishing department) 300 Employers' national insurance contributions for both departments 40 Rent and rates 60 Heating (the manufacturing department is not heated) 25 Lighting 25 Machinery depreciation 75 56 50 25 Canteen expenses* Electricity for machinery Insurance: machinery