Question 1: Williams, a professional services firm has overhead of £625,000. It operates three divisions and an accountant's estimate of the overhead allocation per division is 38% for Division 1, 22% for Division 2 and 40% for Division 3. The divisions respectively bill 4,100, 1,950 and 3,300 hours. Calculate the business-wide overhead recovery rate and the cost centre overhead recovery rate for each division.
Question 2: Randy's Components uses an activity based costing system for its product costing. For the last quarter, the following data relates to costs, output volume and cost drivers. If set-up costs are driven by the number of production runs, what are the correct set-up costs for each product?
Overhead Cost £
Machinery 172,000
Set-ups 75,000
Materials Handling 25,000
Total 272,000
Product information A B C
Production and sales units 5,000 3,500 2,800
Number of production runs 11 9 6
Number of stores orders 15 10 9