Exercise 4.14 Departmental Overhead Rates Mariposa, Inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Harry Whipple, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate. OB Mariposa has the following data for its two departments for the coming year: Department A Department B Overhead costs (expected) Normal activity (machine hours) S720,000 120,000 $180,000 60,000 Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. 2. Compute predetermined overhead rates for each department using machine hours. 3. Suppose that a machine tool (Product X75) used 60 machine hours from Department A and 150 machine hours from Department B. A second machine tool (Product Y15) used 150 machine hours from Department A and 60 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Require- ment 1. Repeat the computation using the departmental rates found in Requirement 2. Which of the two approaches gives the fairest assignment? Why? Repeat Requirement 3 assuming the expected overhead cost for Department B is $360,000 Now would you recommend departmental rates over a plantwide rate? continued)