Morrison Company carefully records its costs because it bases prices on the cost of the goods it manufactures. Morrison also carefully records its machine usage and other operational information. Manufacturing costs are computed monthly, and prices for the next month are determined by adding a 20% markup to each product??s manufacturing costs. The cost driver rate is based on machine hours as follows:

Profits have been acceptable until the past year, when Morrison began to face increased competition. The marketing manager reported that Morrison??s sales force finds the company??s pricing puzzling. When demand is high, the company??s prices are low, and when demand is low, the company??s prices are high. Practical capacity is 1,500 machine hours per month. Practical capacity is exceeded in some months by operating the machines overtime beyond regular shift hours. Monthly machine-related overhead costs, all fixed, are $70,000 per month.Required(a) Compute the monthly overhead cost driver rates that Morrison used last year.(b) Suggest a better approach to developing cost driver rates for Morrison and explain why your method isbetter.

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MONTH ACTUAL MACHINE HOURS 1,350 1,400 1,500 1,450 1,450 ACTUAL MACHINE HOURS 1,400 1,400 1,500 1,600 1,600 1,600 MONTH January July August September October November February March April May June 1,400 December