Exercise 4: Dealing with overheads on a cost centre basis Green plc is an engineering business doing work for its customers to their particular requirements. It determines the full cost of each job taking a job-costing' approach, accounting for overheads on a cost centre basis. It bases its prices to customers on this full cost figure. The business consists of two production departments and one service department: Machining: where each job starts Assembly: specialists complete all of the jobs ADMIN (service dept.): renders services to both production departments Budgeted information for next year is as follows: Machine power 10,000: Depreciation 30,000: Machine time: 20,000 hrs: Admin wages & o/h 10,000: Heat & lighting 30,000: Indirect labour in Machining & Assembly Dept. 50,000: all allocated to Machining dept all relates to Machining dept all worked in the Machining dept all relate to Admin dept apportioned equally between depts apportion to production depts. in proportion to direct labour hours Direct labour 200,000: 50,000 Machining, 150,000 Assembly; all workers are paid 10 per hour all applied to jobs in Machining dept Direct materials 120,000: a) Allocate and apportion the budgeted overheads to the three cost centres. b) Reapportion the service cost centre's overheads to the production cost centres. The ADMIN department's costs are reapportioned to the 2 production departments in proportion to direct labour hours worked in the production departments