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Western Wood Products cost drivers: single or two part rate method

Western Wood Product 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 dividing 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:

Manufacturing support: Cutting Assembly Total
Manufacturing support: $25,000 $33,000 $60,000
Direct labor hours 1,000 3,000 4,000
Machine hours 4,000 2,000 6,000

What was the single plant wide cost driver rate?

Determine departmental cost driver rates based on direct labor hours for assembly and machine hours for cutting?

Provide reasons why Western Wood might use the method in (a) or (b)?

Solution Preview

Western Wood Product 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 dividing plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labor hours. The estimates for ...

Solution Summary

This discusses the computation of single plant wide cost driver rate

$2.19