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Delta is an electronic company manufacturing different types of products. They have appointed a new management accountant who has explained about Overheads Overhead is the cost incurred in the course of making a product, providing a service of running a department, but cannot be traced directly and in all to the product or service He also explained that there are different methods to deal with overheads to get the more accurate cost of product, which is very important to deal with competition Delta Company has two production departments (A and B and two service departments (Service 1 and Service 2). The information about the budgeted cost as given as below: Overhead cost Total (OMR) Rent and rates 1200 to 13000 (choose between Floor area Machine Insurance 5000 to 7000 (choose between Machine Value Depreciation of machine 16000 Machine value Production supervisor's salary 22000 I hours worked Heating and lighting 6200 Floor area The company has new premises, and all the departments are housed in this premises The additional details about the production and service department are given below: 2000x120 2000 Base Department A Department B Service 1 Service 2 Floor Area (Sq, meters 2000 1000 600 400 4000 p Machine Value (OMR) 2000e seed 2000 1000 Labour Hours 3000 1600 1600 Labour Rate per hour 3.80 3.50 3.00 3.00 (OMR) Service 1 70% 20% Service 2 30% 10% Required: 4 a) Prepare a statement showing the overhead cost for each production department showing the basis of apportionment used. Marks b) Reapportion the overheads using the direct method of reapportionment. 2 Marks c) There are different ways to deal with the overhead, Absorption costing is a method of sharing overheads between different products on a fair basis. Discuss and Evaluate the Absorption costing procedure. 4 Marks

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