Western Wood Products has two production departments: cutting and assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labor hours. That is, the plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labor hours. The estimates for support costs and quantities of cost drivers for 2006 follow:
______________________ Cutting______Assebmly_____________Total____________
Manufacturingsupport $25,000 $35,000 $60,000
Direct labor hours 1,000 3,000 4,000
Machinehours 4,000 2,000 6,000
a. What was the singleplantwide cost driver rate for 2006?
b. Determine departmental costdriver rates based on direct labor hours for assembly and machinehours for cutting.
c. Provide reasons why Western Woodmight use the method in (a) or in (b).