Ugur Ltd makes three different types of marine compass: Type A, Type D and Type N. Each compass passes through two production departments: assembling and finishing. Ugur absorbs its overheads on the basis of direct labour hours.

Production overheads for the next 12 months are expected to be
....................................................... £
Factory power..................... 80,000
Depreciation........................ 60,000
Fixed asset insurance........... 3,600
Supervisors€™ pay.................. 40,000
Factory rent.......................... 70400
.............................................. 254,000
The following information for next year is also available:

Times per product (hours):

Each operative is expected to work 36 hours a week for 46 weeks a year.

Tasks:
1.  Calculate the total overheads for each department.
2.  Calculate the overhead absorption rate for each department (to three decimal places).
3.  Calculate the overhead cost attached to each type of compass.
4.  Recalculate your answers to tasks 2 and 3 if overheads were absorbed on a machine hour basis and comment on your findings.

Transcribed Image Text:

Assembly 30 Finishing 20 Number of direct operatives Floor space (sq. metres) Book value of fixed assets (£000) Machine hours Power (kilowatt hours used) Supervisory staff 16,000 9,000 60 15,000 30,000 30 30,000 20,000 Assembly Machine 0.75 Finishing Labour 0.75 Labour Machine Type A Type D 1.0 1.5 2.5 0.50 1.00 0.40 Type N 0.50 0.25 1.50 0.30