Idaho Mechanical Systems has two departments: Fabrication and Finishing. Three workers oversee the 25 machines in Fabrication. Finishing uses 35 crafters to hand-polish output, which is then run through buffing machines. Product CG9832-09 uses the following amounts of direct labor and machine time in each department:

Following are the budgeted overhead costs and volumes for each department for the upcoming year:

a. What is the plantwide OH rate based on machine hours for the upcoming year?
How much overhead will be assigned to each unit of Product CG9832-09 using this rate?
b. Idaho Mechanical's auditors inform management that departmental predetermined OH rates using machine hours in Fabrication and direct labor hours in Finishing would be more appropriate than a plantwide rate. What would the OH rates be for each department? How much overhead would have been assigned to each unit of Product CG9832-09 using departmental rates?
c. Discuss why departmental rates are more appropriate than plantwide rates for IdahoMechanical.

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Finishing 0.30 2.00 Fabrication Machine hours Direct labor hours 10.00 Fabrication Finishing Budgeted overhead Budgeted machine hours Budgeted direct labor hours $635,340 72,000 4,800 $324,000 9,300