Bobich Ltd manufactures plastic containers for the pharmaceutical industry. The factory, in which the company undertakes all its production has two production departments namely: Cutting and Shaping and two service departments- Stores and Maintenance.
The information below was extracted from the company’s budget for its financial year ended 31 March 2019.

Required:
i) Explain what is meant by the term “blanket overhead rate”.                                                                                                                  (2 marks)

ii) Prepare an overhead analysis sheet based on the above information. You must clearly state the basis used for any apportionments.  (7 marks)

iii) Re-apportion the service department costs and calculate the most appropriate overhead rate for each department. (Rate should be calculated to two decimal places).                                                                                                                                            (3 marks)

iv) State THREE (3) reasons why companies calculate pre-determined overhead absorption rates.                               (3 marks)

HK manufacturing company is considering introducing a high day rate incentive scheme. An experiment with one of its average workers showed that an employee is likely to produce 1,500units in a 40hour week if she was paid GH¢25 per hour but 1800units if she was paid GH¢31.25 per hour.
Assume that production overhead is added to cost at the rate of GH¢25 per direct labour hour.

Required:
i) Determine the cost per unit of output on both the low day rate scheme and high day rate scheme.                               (3 marks)

ii) Is it advisable to introduce the high day rate scheme?                                                                                                    (2 marks)