Azure Ltd., manufactures boat engines and propellers. Azure has been accumulating manufacturing overhead costs into one cost pool, and charged $120 overhead cost to each unit of product. Azure made 4,800 units of engines and 3,200 units of propellers last year. The cost accountant believes that there are signifi cant differences in how each product line uses resources, and is considering using the ABC costing method to allocate the manufacturing overhead costs. She analyzes the manufacturing overhead costs and gathers the following information:

Activity Costs ................................................................................................................................ Cost Driver
25% of the overhead costs is for machine amortization................................................. Number of units
45% of the overhead costs is for material handling............................ Number of times material moves
30% of the overhead costs is for testing............................................................................. Number of tests

The Engine Department has materials moved 200 times and 120 tests done, while the Propeller Department has materials moved 400 times and 180 tests done.

REQUIRED

A. What are the manufacturing overhead costs allocated to the Engine Department and the Propeller Department?
B. What are the overhead rates for machine amortization, material handling, and testing?
C. Based on each of the overhead rates calculated in (B), what are the total overhead costs allocated to the Engine Department and the Propeller Department?
D. Which department has over-allocated the overhead costs using the traditional method? Explain why this is the case.