Question 3 ( 35 marks) Space Ltd has two production departments, A and B. The following budgeted overheads are expected to be incurred next quarter: $ Indirect costs Department A 15,080 Department B 9,240 Machine maintenance 17,460 Factory rent 46,200 Power 10,230 The following information is also available: Department A 70% No of machines 6 Floor area (m) 4,620 Power usage Department B 30% 2 3,080 Department A is machine intensive while Department B is largely labour-based. Information on machine and labour hours for the two production departments is shown below: Department A 3,600 Department B 15,600 Direct labour hours Machine hours 12,300 4,800 REQUIRED: (i) Reproduce the table on the next page and calculate the overhead absorption rate in each department by completing the table. You are required to use the most appropriate basis to apportion the relevant overhead costs. (Please show detailed workings and round up your answers to two decimal places.) (30 marks) (ii) One of Space Ltd's products is Axe. Cost information to produce one unit of Axe is as follows: Direct materials Direct labour 5 kg at $6.70 per kg 10 hours at $8 per hour Time Spent in: Department A Department B 5 machine hours 7 direct labour hours Find the cost per unit of Axe (Please show detailed workings and express your answers in two decimal places.) (5 marks) Solutions: (1) Basis Total $ Production Department A B S $ Allocated Apportionment Total Activity Base Overhead Absorption Rate