A manufacturing business includes a service department, X, together with production departments, Y and Z. Department Z relies heavily on labour. How is the overhead absorption rate determined for department Z?
- Aapportion total overheads across X, Y and Z; reapportion X’s overheads to Y and Z; divide Z’s overheads by budgeted labour hours
- Bapportion total overheads across X, Y and Z; reapportion X’s overheads to Y and Z; divide Z’s overheads by actual labour hours
- Csubtract X’s overheads from total overheads; apportion remaining overheads across Y and Z; divide Z’s overheads by budgeted labour hours
- Dsubtract X’s overheads from total overheads; apportion remaining overheads across Y and Z; divide Z’s overheads by actual labour hours