Question $4(30$ marks$)$

Mango Value Ltd is preparing its overhead budgets for the December $2023$ period. The

entity makes a product that passes through three production department and is also

affected by two service departments. The three production departments are milling,

processing and packaging, and two service departments are stores and inspections.

The following budgeted overheads and budgeted activity levels have been produced:

Overhead is absorbed on a machine hour basis. It has been estimated that service

department usage is as follows:

However, during the period ended December $31,2023,$ actual overheads in department milling, processing and packaging were as follow respectively: $$2,400,000,$ $$2,800,000$ and $$4,000,000$; while, actual activity levels for all three were $240,000,325,000$ and $480,000$ machine hours for milling, processing and packaging respectively.

Required:

$($a$)$ Use the direct method to derive the re$-$allocated overheads to production departments and derive the overhead absorption rates for these departments. $(6$ marks$)$

$($b$)$ Use the step$-$down method to derive the re$-$allocated overheads to production departments and derive the overhead absorption rates for these departments. $(8$ marks$)$

$($c$)$ Use the simultaneous equation method to derive the re$-$allocated overheads to production departments and derive the overhead absorption rates for these departments. $(11$ marks$)$

$($d$)$ From the information calculate in part $($c$)$ above, derive the under$/$under absorption of overheads in each department. $(5$ marks$)$