The Gonzalez Company uses a job order costing system at its plant in Green Bay, Wisconsin. The plant has a machining department and a finishing department. The company uses two cost driver rates for allocating manufacturing support costs to job orders: one on the basis of machine hours for allocating machining department support costs and the other on the basis of direct labor cost for allocating the finishing department support costs. Estimates for 2006 follow:
Machining Department Finishing Department
Manufacturing support cost 500,000 400,000
Machine Hours 20,000 2,000
Direct Labor hours 5,000 22,000
Direct Labor Cost 150,000 500,000
a. Determine the two departmental support cost driver rates.
b. During July 2006, cost records for job 511 show the following:
Machining Department Finishing Department
Direct materialscost 12,000 2,000
Direct laborcost 300 1,200
Direct laborhours 10 50
Machinehours 80 8
Determine the total costs charged to job 511 in July 2006.
c. Explain why Gonzalez Company uses two different costdriver rates in its job costing system.