Question 4 (a) Josh Ltd manufactures electronic components in a batch of 500 units at a time. The company has three production cost centres, P1, P2, P3 and one service cost centre, S. Cost centre S provides services to all three production departments and the company uses an absorption costing system for calculating its costs. The following details have been extracted from the current year's budget P3 P 2800000 160000 Alocated and Apportioned Overheads ( 1,500,000 1,180,000 Direct labour hours 30,000 40000 10,000 Machine hours 66,000 12000 15,000 In period 1, Lexington Ltd produced 20 batches of the electronic components. Direct materials and direct labour to 5,012 and 3,500 costs amounted respectively. Direct labour and machine hours incurred in Period 1 were as follows: PI P2 P3 200 90 Direct labour hours 360 Machine hours 32 80 110 Required: . Re-apportion the service cost centre overheads to the three production departments on the basis of budgeted direct labour hours. (3 marks) i. Calculate departmental overhead absorption rate (OAR) using a machine hour basis for production cost centres P1 and P3 and a direct labour hour basis for P2 (2 decimal places). (3 marks) i. Calculate the total production cost per batch in period 1 using your calculated departmental absorption rates in (ii) above. What is the production cost for one unit of the electronic component? marks Required: i. Re-apportion the service cost centre overheads to the three production departments on the basis of budgeted direct labour hours. (3 marks) ii. Calculate departmental overhead absorption rate (OAR) using a machine hour basis for production cost centres P1 and P3 and a direct labour hour basis for P2 (2 decimal places) (3 marks) iii. Calculate the total production cost per batch in period 1 using your calculated departmental absorption rates in (ii) above. What is the production cost for one unit of the electronic component? (6 marks iii. If actual overheads in period 1 for P1, P2 and P3 were 950, 22,400 and 9,500 respectively, calculate the over or under absorption of overheads for each production cost centre based on your calculated OAR in part (ii). State clearly whether overheads were over or under absorbed