QUESTION 1: Fox Ltd (Chapter 4 - Full Costing) - 4 marks The following information has been taken from the budget for the forthcoming financial year: Direct materials cost 900,000 Direct materials usage 45,000kg Direct labour cost 540,000 Direct labour time 18,000 hrs Maintenance 260,000 Depreciation 195,000 Rent 140,000 Indirect Materials 44,000 Indirect Labour 120,000 Other indirect costs 52,000 Machine time 12,000 hrs All direct labour is paid the same hourly rate. Currently, Fox Ltd has Project X which has the following cost: Raw materials 520 kg Direct labour hours 330 hours Machine hours 350 hours Required: A. Calculate overhead absorption rate (OAR) using direct labour and machine hour basis. B. B. Prepare full costing for Project X separately using machine hour basis as well as direct labour hour basis in the allocation of total overheads. C. Explain how a business should decide in using direct labour basis or machine basis in allocating overheads