Question

Lee Limited‘s factory comprises of two production departments, Milling and Finishing, and two service departments Maintenance...

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)

                                                                                                                 

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