Hill 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-hours in the Assembly Department. At the beginning of 20X5, the following estimates were provided for the coming year:
|
Machining |
Assembly |
| Direct labor-hours |
10,000 dlh |
90,000 dlh |
| Machine-hours |
100,000 mh |
5,000 mh |
| Direct labor cost |
$ 80,000 |
$720,000 |
| Manufacturing overhead costs |
$250,000 |
$360,000 |
The accounting records of the company show the following data for Job #846:
|
Machining |
Assembly |
| Direct labor-hours |
50 dlh |
120 dlh |
| Machine-hours |
170 mh |
10 mh |
| Direct material cost |
$2,700 |
$1,600 |
| Direct labor cost |
$ 400 |
$ 900 |
Required:
a. Compute the manufacturing overhead allocation rate for each department.
b. Compute the total cost of Job #846.
c. Provide possible reasons why Hill Manufacturing uses two different cost allocation rates.