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No.2: Where different products or jobs use the same facilities but at different rates, then the method chosen for overhead absorption has a direct effect on the cost of each job or product. The data below relates operations in 1999 by XYZ, Ltd, a manufacturing company that employs normal job costing. All jobs pass through the company's two departments namely Preparation and Finishing Departments. Preparation dept Finishing dept Direct materials sh 600,000 sh 60,000 Direct labour 480,000 120,000 Factory overheads 240,000 180,000 Direct labour hours 120,000 45,000 Machine hours 60,000 30,000 The following information relates to job No.31 undertaken in the year: Preparation dept Finishing dept Materials sh 60,000 sh.120,000 Labour 24,000 18,000 Direct labour hours 25,000 1,600 Machine hours 20,000 2,000 The company employs the same overhead absorption method in the two departments. Required: 1. Enumerate the four possible methods for absorbing factory overheads to the jobs by the company, showing the rates for each department under each of the methods chosen. 2. Using job NO.31 as an example, show how the choice of absorption method affects the cost of a job or product. Note: compare only two absorption methods out of the four enumerated under (1) above. 3. Explain what should be the basic criteria in the choice of the overhead absorption method to use

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