Western Wood Products has two production departments: cutting and assembly. The company has been using a single predetermined cost driver rate based on plant wide direct labor hours. That is, the plant wide cost driver rate is computed by dividing plant wide support costs by total plant wide direct labor hours. The estimated for support costs and quantities of cost drivers for 2006 follow:
Cutting Assembly Total
Manufacturingsupport 25,000 35,000 60,000
Direct laborhours 1,000 3,000 4,000
Machinehours 4,000 2,000 6,000
a. What was the single plant wide cost driver rate for2006?
b. Determine departmental cost driver rates based on directlabor hours for assembly and machine hours for cutting.
c. Provide reasons why Western Wood night use the method in(a) or (b).
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