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6. Apex Ltd manufactures beds and has budgeted for the following factory overhead costs for...

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Accounting

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6. Apex Ltd manufactures beds and has budgeted for the following factory overhead costs for next year: 25,000 90,000 55,000 Insurance of plant and equipment Rent and Rates Heat & Light Indirect Labour: Maintenance Stores 22,000 25,000 47,000 Total 217,000 The factory has four departments, Weaving, Cutting, Stores and Maintenance. The following information is available: Stores Maintenance 1,500 750 Department Carrying value of equipment Floor Space (sq metres) Issues of materials from stores Budgeted machine hours Budgeted labour hours Cutting 85,000 750 1,200 8,500 4,500 Assembly 15,000 900 2,200 2,500 1,200 60% of maintenance relates to the cutting department, 30% to assembly and 10% to Stores. I Required: a) Calculate the appropriate overhead recovery rates for the Cutting and Assembly departments to the nearest penny. 4. 527 Introduction Management Accounting [9 marks] b) Discuss the practical limitations of traditional absorption costing and suggest an alternative approach. [6 marks] [Total 15 marks]

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