Country is Australia - Management Accounting Please help me for this question. Big Gear Manufacturing Pty Ltd has two production departments, Machining and Finishing, and a service department, Stores. Previously, Big Gear Manufacturing has used a single, factory-wide overhead application rate. Recently the owner, Hamish Gear, has approached you to discuss ways the business can charge overheads to products more accurately. In your role as the Cost Accountant, you agreed to establish a process for developing overhead application rates by department to accomplish this. Estimates of direct departmental factory overheads and the factory-wide overheads for the year are below. Factory overhead budget July - June $ $ Indirect labour Machining 9,900 Finishing 18,050 Stores 5,400 33,350 Indirect materials Machining 12,900 Finishing 14,900 Stores 75,000 102,800 Insurance on premises 2,400 Staff amenities 20,000 Council rates (factory) 4,200 Electric power for machinery 15,000 Depreciation - machinery 15,000 Insurance on machinery 2,500 Material handling costs 9,000 Total factory overhead budget 204,250.

Required:

1. Obtain the relevant statistics and operating data you will use to allocate the factory-wide overheads to each department.
2. Prepare the overhead budget by department using the approved organisational template (see below)
3. Allocate the service department costs to the production departments.
4. Calculate the factory overhead application rate for the production departments based on your discussions with the managers of the production departments.
5. In a brief report, confirm with Hamish that you have prepared overhead application rates by department as he requested (you should state the relevant overhead rates).In your report, outline the process you followed and the resources you used. Finally, briefly explain to Hamish why you think your process should be adopted as the new system to generate departmental overhead application rates.

Big Gear Manufacturing Pty Ltd
Departmental Statistics/operating data
		Machining	Finishing	Stores
Floor space (sq m)	2,000	8,000	2,000
Number of employees	5	10	5
Power usage	55%	45%
Value of machinery	$ 80,000	$ 170,000
Number of materials requisitions	1,200	600
Direct labour cost	$ 165,000	$ 370,000
Machine hours	8,000	4,000

Big Gear Manufacturing - Factory Overhead Budget
		Department
Budget	Allocation base	Machining	Finishing	Store	Total FOH
Direct departmental overhead budget
Indirect labour
Indirect materials
Total direct departmental costs
Indirect department costs
Insurance on premises
Staff amenities
Council Rates (factory)
Electric power for machinery
Depreciation - machinery
Insurance on machinery
Material handling costs
Total indirect costs
TOTAL DEPARTMENTAL FOH BUDGET
REALLOCATION OF SERVICE DEPT COSTS
Storeroom
REVISED TOTAL FOH BUDGET
Cost driver volume
Departmental overhead rate