Question - Noah's Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labor dollars in the Assembly Department. At the beginning of 2013, the following estimates were provided for the coming year:
Machining Assembly
Direct materials 10,000 30,000
Machine hours 30,000 20,000
Direct labor cost $200,000 $1,000,000
Manufacturing Overhead costs $440,000 $500,000
The accounting records of the company show the following data for Product #APE1:
Machining Assembly
Direct materials 50 100
Machine hours 200 50
Direct material cost $2,100 $1,200
Direct labor cost $1,000 $2,300
Required:
a. Compute the predetermined manufacturing overhead cost driver rate for each department.
b. Compute the total cost of Product #APE1
c. Provide possible reasons why Noah's Manufacturing uses two different cost drivers.