Crows Nest Manufacturing Uses Departmental Cost Driver Rates to Apply

Essay

Crows Nest 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 labour-hours in the Assembly Department.At the beginning of 2013,the following estimates were provided for the coming year:
$$\begin{array} { l l l } & \text { Machining } & \text { Assembly } \\\text { Direct labour-hours } & 10000 \mathrm { dlh } & 90000 \mathrm { dlh } \\\text { Machine-hours } & 100000 \mathrm { mh } & 5000 \mathrm { mh } \\\text { Direct labour cost } & \$ 80000& \$ 720000 \\\text { Manufacturing overhead costs } & \$ 250000 & \$ 360000\end{array}$$
The accounting records of the company show the following data for Job #846:
$$\begin{array} { l l l } & \text { Machining } & \text { Assembly } \\\text { Direct labour-hours } & 100 \mathrm { dlh } &170 \mathrm { dlh } & \\\text { Machine-hours } & 270 \mathrm { mh } &30 \mathrm { mh } & \\\text { Direct material cost } & \$ 3700 & \$ 2600 \\\text { Direct labour cost } & \$ 800 & \$ 1900\end{array}$$
Required:
a.Compute the manufacturing overhead allocation rate for each department.
b.Compute the total cost of Job #846.
c.Provide possible reasons why Crows Nest Manufacturing uses two different cost-allocation rates.
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