Reference no: EM132567283

A product manufactured by RTS Ltd needs to go through two production departments, Machining and Finishing. A particular customer order just completed incurred the following machine hours and direct labour hours in the two production departments:

Direct Labour Hours (machining) : 25

Direct Labour Hours (finishing): 28

Machine Hours (machining): 46

Machine Hours (finishing): 8

Direct labour in both departments is paid at a basic rate of $4.00 per hour. 10% of the direct labour hours in the Finishing department are overtime hours, paid at 150% of basic rate. As the customer has requested for RTS Ltd to rush out the order, the overtime premium will be charged to the customer. Ignore all CPF contributions. The customer order was to make 190 units, with each unit requiring 1.08 kgs of prepared material. Loss on preparation is 10% of unprepared material. The unprepared material costs $2.35 per kg.

Overhead application rates are to be calculated from the following budgeted data for the year:

Production overhead costs (machining): $35,280

Production overhead costs (finishing): $12,480

Direct labour hours (machining): 3,500

Direct labour hours (finishing): 7,800

Machine hours (machining): 11,200

Machine hours (finishing): 2,100

Required: (Show all computations and round all calculations to 2 decimal places)

Question (a) As the Cost Accountant of RTS Ltd, compute the overhead application rate for each department, using the most appropriate base. Briefly explain and justify your choice of bases.

Question (b) Calculate the total costs of the customer order to make the 190 units.