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Cutting and Assembly - Cost driver rates

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Two product departments within a company: 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 previous year are:

Cutting:
Manufacturing Support - $25,000
Direct Labor Hours - 1,000
Machine Hours - 4,000

Assembly:
Manufacturing Support - $35,000
Direct Labor Hours - 3,000
Machine Hours - 2,000

Totals:
Manufacturing Support - $60,000
Direct Labor Hours - 4,000
Machine Hours - 6,000

a. What was the single plantwide cost driver rate?

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

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a. What was the single plantwide cost driver rate?

Total Direct Labor Hours = 4,000 hours
Total Manufacturing Support Costs = $ 60,000

Hence Direct Labor cost per hour = $ 60,000 / 4,000 = $ 15 per labor hour

Hence, the ...

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