Eastern Wood Products has two production departments: cutting and assembly. The company has been using a plant wide cost driver rate computed by dividing plant wide overhead costs by total plant wide direct labor hours. The estimates for overhead costs and practical capacity quantities of cost drivers for the current year follow:

Required(a) Compute the plant wide cost driver rate.(b) Determine departmental cost driver rates based on direct labor hours for assembly and machine hours for cutting.(c) Provide reasons why Eastern Wood might use the method in part a or the one in partb.

Transcribed Image Text:

TOTAL ASSEMBLY CUTTING Manufacturing overhead Direct labor hours Machine hours $25,000 1,000 4,000 $35,000 3,000 2,000 $60,000 4,000 6,000