Zombo manufactures 3 designs for the garden sheds, basic, standard and luxury For the production of these 3 play houses the following information below is provided:
A) Calculate how the total costs of the garden sheds manufactured by Zombo LTD are arrived at.
B) Illustrate how the company apportions costs to service and production departments and then reapportions service department costs to production departments. You should continue by then calculating an overhead absorption rate based on direct labour hours in each production department. Your example should include an illustration of how over and under absorption adjustments are made.
I created two analysis of the cost per unit, one using the firm-wide overhead application rate and another using the three departmental application rates. Click in the cells to see the computations.