A factory manufactures garden huts. The production process is classified into two production departments, Assembly and Joinery. There is one service department, the canteen. The relevant forecast information for the year ahead is as follows:

Indirect costs for all three departments in total:

                                                                            Total

                                                                               £

Indirect labour .............................................. 90,000

Indirect material .......................................... 81,000

Heating and lighting ................................... 25,000

Rent and rates ............................................ 30,000

Depreciation ................................................ 56,000

Supervision .................................................. 45,000

Power ............................................................ 36,000

Total ................................................................ 363,000

The following information is available about each department:

The canteen is used by both production cost centres.

Required

1. Apportion production overhead costs over the Assembly, Joinery and Canteen departments using a suitable method for each department.

2. Apportion service department costs over production departments.

3. For each production department, calculate an overhead cost rate, based on labour hours, which may be used to absorb production overhead cost into jobs.

4. Find the overhead cost of a job which spends three labour hours in the Assembly department and four labour hours in the Joinery department.

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Total Assembly Joinery Canteen Floor space (sq. metres) Book value of machinery (£) Number of employees Kilowatt hours of power Direct materials (£) Direct labour (£) Maintenance hours Labour hours 24,000 240,000 60 8,000 50,000 42,000 6,000 8,400 50,000 560,000 150 18,000 6,000 20,000 10 1,000 20,000 300,000 80 9,000 100,000 50,000 8,000 12,640