Bull Bay Ltd. Manufacturers two types of surfboard, "Winner" and "Surf King", whose selling prices are $300 and $900 respectively. Each surfboard passes through two manufacturing departments, Moulding and Finishing. In Moulding, each Winner requires 6 hours of labour and each Surf King, requires 12 hours. In the Finishing department, each Winner requires 3 hours of labour and each Surf King, 9 hours. Labour in Moulding is paid $4 per hour and in Finishing $5 per hour.
The surfboards are made from fibreglass, studs and cord. The quantities of materials used in making one unit are as follows:
|
Material
|
Winner
|
Surf King
|
|
Fibreglass
|
40 kilos
|
90 kilos
|
|
Studs
|
10
|
240
|
|
Cord
|
20 metres
|
75 metres
|
Material prices are $3 per kilo for fibreglass, $7.20 per dozen for studs and $0.60 per metre for cording. (Note: 1 dozen = 12 studs).
Other annual costs are as follows:
|
|
$
|
$
|
|
Indirect wages
|
|
|
|
Moulding Dept.
|
75,000
|
|
|
Finishing Dept.
|
120,000
|
|
|
Stores
|
60,000
|
|
|
Canteen
|
30,000
|
285,000
|
|
|
|
|
|
Indirect materials
|
|
|
|
Moulding Dept.
|
154,530
|
|
|
Finishing Dept.
|
175,515
|
|
|
Stores
|
4,025
|
|
|
Canteen
|
25,150
|
359,220
|
|
|
|
|
|
Rent and rates
|
|
450,000
|
|
Depreciation on plant and machinery
|
|
420,000
|
|
Power
|
|
150,000
|
|
Building insurance & heat & light
|
|
25,500
|
|
Advertising
|
|
280,000
|
|
|
|
|
|
Total
|
|
1,969,720
|
|
|
|
|
The annual quantities sold are 25,000 units of Winner and 15,000 units of Surf King.
Other information is as follows:
|
Cost Centre
|
Area (sq. Metres)
|
Book Value of plant & machinery ($000)
|
Horsepower of plant & machinery
|
Direct labour hours
|
Number of employees
|
Number of stores notes issued
|
|
Moulding Dept.
|
10,000
|
1,000
|
70%
|
330,000
|
200
|
10,000
|
|
Finishing Dept.
|
5,000
|
200
|
30%
|
210,000
|
150
|
5,000
|
|
Stores
|
10,000
|
150
|
-
|
-
|
50
|
-
|
|
Canteen
|
5,000
|
50
|
-
|
-
|
25
|
-
|
|
|
|
|
|
|
|
|
|
Totals
|
30,000
|
1,400
|
100%
|
540,000
|
425
|
15,000
|
|
|
|
|
|
|
|
|
Required:
(a) A production overhead analysis schedule showing the bases of your apportionment. Allocate the costs of the service departments to the production departments.
(b) Calculate overhead recovery rates for the Moulding and Finishing departments, on the basis of direct labour hours.
(c) Calculate the full absorption cost of making one unit of each product
(d) How many units of each product will have to be sold to break even?