Lee Limiteds factory comprises of two production departments, Milling and Finishing, and two service departments Maintenance and
Question:
Lee Limited‘s factory comprises of two production departments, Milling and Finishing, and two service departments Maintenance and Administration. The following estimated data are provided:
Production department | Service department | |||
Milling | Finishing | Maintenance | Administration | |
Budgeted overheads | R524 000 | R480 000 | R240 000 | R150 000 |
Machine hours | 30 000 | 20 000 | ||
Area occupied (m²) | 6 300 | 2 700 | 1 200 | 900 |
Number of employees | 150 | 100 | 40 | 30 |
Note:
- Administration department cost is allocated based on number of employees.
- Maintenance department cost is allocated based on area occupied.
- Production overheads are calculated based on machine hours.
Required:
Calculate the Production Overhead for the Administration Department. (6)
Calculate the Production Overhead for the Maintenance Department. (5)
Calculate the Production Overhead for Milling and Finishing (separately) based on machine hours. (5)
Differentiate between period cost and product cost. (4)