$4-$B$2$ Allocation, Department Rates, and Direct$-$Labor Hours Versus Machine Hours

The Hernandez Manufacturing Company has two producing departments, machining and assembly. Mr$.$ Hernandez recently automated the machining department. The installation of a CAM system, together with robotic workstations, drastically reduced the amount of direct labor required. Meanwhile, the assembly department remained labor intensive. The company had always used one firm$-$wide rate based on direct$-$labor hours as the cost$-$allocation base for applying all costs $($except direct materials$)$ to the final products. Mr$.$ Hernandez was considering two alternatives: $(1)$ continue using direct$-$labor hours as the only cost$-$allocation base, but use different rates in machining and assembly, and $(2)$ using machine hours as the cost$-$allocation base in the machining department while continuing with directlabor hours in assembly. Budgeted data for $20$X$0$ are as follows:

$\backslash$table$[[,$Machining,Assembly,Total$],[$Total cost $($except direct materials$),$$$540,000,$$$494,000,$$$1,034,000$