Calculate the overhead absorption rates for the cutting

Question

Question:

The following information relates to the departments of Scaife plc for the year ending 31 December 2013.

	Production Dept		Service Dept
	Cutting	Tooling	Administration
Overheads	£28,800	£42,500	£18,600
Direct machine hours	4,750	8,240
Direct labour hours	12,750	2,490

The overheads of the service departments are allocated to the production departments on the following basis:

• cutting75%;
• tooling25%.

Calculate the overhead absorption rates for the Cutting and the Tooling departments. State the bases used and why.