Manufacturing overhead costs totaling $500,000 are expected for this coming year—$200,000 in the Assembly department and $300,000 in the Finishing department. The Assembly department expects to use 4,000 machine hours, and the Finishing department expects to use 30,000 direct labor hours.

Required:

a. Assume this company uses the department approach for allocating overhead costs. Calculate the predetermined overhead rate for each department, and explain how these rates will be used to allocate overhead costs to products.

b.  Why do different departments use different allocation bases (e.g., direct labor hours or machine hours)?