Question 4 Tenaga Engineering Sdn Bhd is a medium size engineering company which undertakes contract Jobs for construction companies. All jobs pass through its three production departments: fabrication, assembly and finishing. The Company has two service departments: stores & maintenance. The typical annual cost and other data for the production and service department is shown in the table below: Tenaga Engineering Sdn Bhd - Cost and Other data Production Departments Cost Items (RM) Fabrication Assembly Direct labour 60,000 45,000 Indirect Labour 20,000 15,000 Repairs 10,000 8,000 Indirect supplies 20,000 10,000 Employee Welfare 9,000 7,000 Service Departments Finishing Stores Maintenance 30,000 15,000 25,000 15,000 1,500 3,000 6,000 8,000 10,000 2,200 4,000 1,500 1,800 Total 119,000 85,000 65.000 18,000 40,000 Electricity (kw) Asset value (RM) Area (Sq, yds) No. of employee Machine Hours 600 60,000 150 30 6,000 Other Data 450 50,000 250 20 5,000 300 40,000 100 15 4.000 100 20.000 50 5 150 30.000 50 5 The Company incurs the following costs for production and service departments during the year. Cost Items Power Maintenance Rent Depreciation Employees' insurance Supervision Total RM 5,000 15,000 12.000 25,000 7,500 12,000 76,500 Basis of cost Allocation Common Cost Power Maintenance Rent Depreciation Employee's Insurance Supervision Basis of Allocation Electricity, kw Machine hours Area, sq yd. Asset Value No. of employees No. of employees The company's activities are divided among the various departments in the following proportion: Stores Fabrication 40% 35% Stores Maintenance Assembly 35% 35% Finishing 20% 30% Maintenance 5% Required: a) Prepare an overhead analysis sheet showing clearly the allocations, apportionments and reapportionments to each cost centre. (12 marks) b) Calculate the appropriate absorption rates for each production departments. (3 marks) Explain why indirect costs cannot be directly traced to cost objects in the same way as direct costs. You may include examples where applicable. (5 marks) (Total: 20 marks)