Milaya Ltd specializes in producing customized souvenirs for special occasions. The company has two production departments, Machining and Assembly. and two service departments. Administration and Maintenance. The components for the souvenirs arc manufactured in the Machining department, and then put together in the Assembly department where they are packed ready for shipping. The overhead costs for the year ended 31 May 2015 were collected as below:

Cost Center	Assembly	Machining	Maintenance	Administration
Allocated overhead costs	£ 40,000	£ 30,000	£ 22,000	£ 48,000

Additional information:
During the year ended 31 May 2015, total direct labour hours used in the Assembly department were 4,800 hours. The Machining department used 6,000 machine hours. Workers are paid a rate of
£ 15.00 per labour hour.
The number of employees in each department was as follows:

Assembly	30
Machining	12
Administration	15
Maintenance	6
Total employees	63

The cost of the machinery in the two production departments is as follows:

Cost Center	Assembly	Machining
Cost of Machinery	£ 70,000	£ 50,000

(1) The Administration department provides services to all other three departments in the company.

(2) The Maintenance department serves both production departments.

(3) The costs in the service departments should be reapportioned to the production departments on the following bases.

Administration department - Number of employees

Maintenance department - Cost of machinery

(4) Overheads are absorbed using an hourly rate for each production department.

(5) Milaya Ltd has received an order from one of its regular customers ( IC'EF) who requires 20 special customized souvenirs for the best graduates. Each souvenir will require 2.5 direct labour hours in the Assembly department and I.5 hours of machine time from the Machining department. The direct material costs are £ 42.00 per one souvenir.

Required:
Calculate the total cost of providing 20 customized souvenirs for the ICEF students.

Answer rating: 100% (QA)

Cost of souvenirs Per unit Direct material 4200 Di... View the full answer