Departmental Overhead Rates

Mariposa, Inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Alice Chen, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate.

Mariposa has the following data for its two departments for the coming year:

Department A Department B

Overhead costs $($expected$)$ $$792,000$ $$198,000$

Normal activity $($machine hours$)110,00055,000$