Management Accounting

PART A: A furniture-making business manufactures quality furniture to customers' orders. It has three production departments and two service departments. Budgeted overhead costs for the coming year are as follows: £ Apportionment Basis Rent and Rates 12800 Floor Area Machine Insurance 6000 Machine Value Telephone Charges 3200 Floor Area Depreciation 18000 Machine Value Production Supervisor Salary 24000 Direct Labour Hours Heating/Lighting 6400 Floor Area Total 70400 The three production departments – A, B & C, and the two service departments – X & Y, are housed in one premises. Other information is given below: A B C X Y Floor Area (Sq. metres) 3000 1800 600 600 400 Machine value (£) 24000 10000 8000 4000 2000 Direct Labour Hours budgeted 3200 1800 1000 Labour Rates per hour £8.80 £8.50 £8.40 £7.50 £7.50 Allocated Overheads: Specific to Each Department 2800 1700 1200 800 600 Dept. X's costs apportioned 50% 25% 25% Dept. Y's costs apportioned 20% 30% 50% Required: 1. Prepare a statement showing the overhead cost budgeted for each production department and calculate suitable overhead absorption rates. 2. The following piece of furniture is to be manufactured. Calculate the Full Cost based on: Direct Material £125, Direct Labour: 10 hours Dept A, 6 hours Dept B, 5 Hours Dept C 3. Calculate the price of the job based on a required mark-up of 25%.