Cease Fire Ltd has two production departments, Machining and Assembly and two service departments, Tooling
and Maintenance.The budgeted activity levels for April 2015 were thus:Machining 400 hours $16 000Assembly 2400 hours $9 600The service departments are apportioned thus:Tooling 70% to Machining 20% to Assembly 10% to Maintenance Maintenance 50% to Machining 30% to Assembly 20% to ToolingDuring April 2015 the actual results were:Machining 420 hours $12 000Assembly 2 300 hours $8 000Tooling $5 000Maintenance $3 000Requireda. Calculate the budgeted overhead absorption rate per hour for each of the production departments(4 marks)b. Calculate the amount of overhead to be charged to each of the production departments (9 marks)c. Calculate the amount of under or over absorption of overhead for each of the production departments (6 marks)d. State what is meant by under or over absorption of fixed overhead and state the reasons as why this may occur (6 marks
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