Question

Lee Limited‘s factory comprises of two production departments, Milling and Finishing, and two service departments Maintenance and Administration. The following estimated data are provided:

	Production department		Service department
	Milling	Finishing	Maintenance	Administration
Budgeted overheads	R524 000	R480 000	R240 000	R150 000
Machine hours	30 000	20 000
Area occupied (m²)	6 300	2 700	1 200	900
Number of employees	150	100	40	30

Note:                                                                                                                                                 

• Administration department cost is allocated based on number of employees.
• Maintenance department cost is allocated based on area occupied.
• Production overheads are calculated based on machine hours.

Required:     

Calculate the Production Overhead for the Administration Department. (6)    

Calculate the Production Overhead for the Maintenance Department. (5)  

Calculate the Production Overhead for Milling and Finishing (separately) based on machine hours. (5)

Differentiate between period cost and product cost. (4)

                                                                                                                 

Answer 1