Australia Industries Pty Ltd manufactures its products through two production departments. Materials are shaped and cut...

Transcribed Image Text:

Australia Industries Pty Ltd manufactures its products through two production departments. Materials are shaped and cut in the machining department and then fitted together in the assembly department. Up to now, Australia Industries Pty Ltd has used a plant-wide application rat to apply overhead using direct labour hours. a. Management wants to investigate the use of departmental overhead application rates and has produced the following estimates for your analysis. Budget estimates Overhead costs Activity levels Machine hours Direct labour hours Machining $18,000 6,000 1,000 Assembly $10,000 1,000 4,000 Total $28,000 7,000 5,000 Required: i.Calculate a plant-wide application rate based on direct labour hours. (5 Marks) ii. Calculate departmental application rates based on machine hours in the machining department and direct labour hours in the assembly department. (5 Marks) iii. Explain the difference between plant-wide and departmental budgets in Australia Industries Pty Ltd. (5 Marks) Australia Industries Pty Ltd manufactures its products through two production departments. Materials are shaped and cut in the machining department and then fitted together in the assembly department. Up to now, Australia Industries Pty Ltd has used a plant-wide application rat to apply overhead using direct labour hours. a. Management wants to investigate the use of departmental overhead application rates and has produced the following estimates for your analysis. Budget estimates Overhead costs Activity levels Machine hours Direct labour hours Machining $18,000 6,000 1,000 Assembly $10,000 1,000 4,000 Total $28,000 7,000 5,000 Required: i.Calculate a plant-wide application rate based on direct labour hours. (5 Marks) ii. Calculate departmental application rates based on machine hours in the machining department and direct labour hours in the assembly department. (5 Marks) iii. Explain the difference between plant-wide and departmental budgets in Australia Industries Pty Ltd. (5 Marks)

Answer rating: 100% (QA)

i Calculation of plantwide application rate based on direct labour hours The plantwide application rate is calculated by dividing the total overhead c... View the full answer