Langdale Ltd is a small company manufacturing and selling two different products – the Lang and the Dale. Each product passes through two separate production cost centres – a machining department, where all the work is carried out on the same general purpose machinery, and a finishing section. There is a general service cost centre providing facilities for all employees in the factory. The company operates an absorption costing system using budgeted overhead absorption rates. The management accountant has calculated the machine hour absorption rate for the machining department as £3.10 but a direct labour hour absorption rate for the finishing section has yet to be calculated. The following data have been extracted from the budget for the coming year: 

Service cost centre costs are reapportioned to production cost centres. 

Required

1. Calculate the direct labour hour absorption rate for the finishing section. 

2. Calculate the budgeted total cost for one unit of product Dale only, showing each main cost element separately. 

3. The company is considering a changeover to marginal costing. State, with reasons, whether the total profit for the coming year calculated using marginal costing would be higher or lower than the profit calculated using absorption costing. No calculations are required.

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Product Lang Dale Sales (units) Production (units) Direct material cost per unit Direct labour cost per unit: - machining department (£8 per hour) - finishing section (£6 per hour) Machining department – machine-hours per unit Fixed production oerhead costs: - machining department - finishing section - general service cost centre Number of employees: - machining department - finishing section - general service cost centre 6 000 9 000 7 200 10 400 £52 £44 £72 £40 £42 £36 5 3 £183 120 £241 320 £82 800 14 32 4