TASK 1 (A) Briefly differentiate between Direct Costs and Indirect costs in total Product Cost determination in business (3 marks) Direct costs are expenses that are directly related to the production of goods or the provision of services, whereas indirect costs are general company expenses that keep you in business. (B1) Calculation of heating cost allocated to each production department: Allocation base and total : Mark (1 mark) Heating cost to be allocated = Allocation Rate (show formula) = (1 mark) Rate/per cubic Cubic metre Final heating Cost Metres/per department Allocated to production departments Manufacturing Heating cost allocated to Heating cost allocated to Finishing (1 mark) (1 mark) Heating cost allocated to Packaging Total Marks (1 mark) (5 marks) (B2) Reallocation of Service Department Costs: Reallocation of Maintenance Overhead Cost Maintenance Annual overheads to be re-allocated = Mark 2 Reallocation base = % Usage (total % = 100) Reallocation rate(show formula) = Maintenance cost allocated Maintenance cost allocated to Manufacturing: to Finishing: Maintenance cost allocated to Packaging: Maintenance cost allocated to Stores: Total Marks (1 mark) per % of usage % of service Total maintenance cost re- department allocated usage Reallocation of Stores Overhead Cost Stores Annual overheads to be re-allocated = (1 mark) (1 mark) (1 mark) (1 mark) (5 marks) Mark (1 mark) Reallocation base = % Usage (total % = 100) Reallocation rate (show formula) = (1 mark) per % of usage % of service Total Stores Cost re-allocated department usage Stores cost allocated to Manufacturing: Stores cost allocated to Finishing: Stores cost allocated to Packaging: Stores cost allocated to Quality Control: Total Marks Reallocation of Quality Control Overhead Cost Quality Control Annual overheads to be reallocated= Reallocation base = % Usage (total % = 100) Reallocation rate (show formula) = per % of usage Quality Control cost allocated to Manufacturing: Quality Control cost % of service Total Quality Control Cost re- department allocated usage (1 mark) (1 mark) (1 mark) (1 mark) (6 marks) Mark (1 mark) (1 mark) (1 mark) (1 mark)