Practice questions:
West Wales Windsurfers Ltd make two models of windsurfer. The company has two production departments: The Shaping Department and the Finishing Department. It also has a canteen which serves all the employees. The budgeted sales and costs for the next year are as follows:
Required:
a. Advise the company on the method of overhead absorption which should be used for each department giving reasons for your choice.
b. Calculate an appropriate overhead absorption rate for each production department.
c. Calculate the budgeted production cost per unit of each model of windsurfer.