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Spot Ltd. produces three products, X, Y and Z in three production departments: Moulding (Dept. M), Assembly (Dept. A) and Finishing (Dept. F). It also has two service departments responsible for repairs and maintenance (Dept. R) and for development and research (Dept. D).
Employees in Dept. R are paid total salaries of £24,000 per annum and complete timesheets to account for their time. Departments M, A, F and D utilise its services in the ratio 70:20:8:2 respectively.
Dept. D studies improvements in working practices and product designs. The salary costs of this department total £20,000 per annum, and its work is expected to benefit the three production departments equally.
The management accountant has estimated that the following factory overheads (excluding the salaries described above) will be incurred in the coming year:
Note
£000's
Rent and rates
240
Electricity
1
75
Establishment costs
200
Plant insurance
60
Plant depreciation
600
Materials handling
2
12
Supervisors' salaries
3
Other overheads
4
72
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