Forrester Company uses a normal job-order costing system. The company has two departments through which most jobs pass. Selected budgeted and actual data for the year ended follows:

	Department A	Department B
Budgeted Overhead	$100,000	$500,000
Actual Overhead	$110,000	$520,000
Expected Activity (Direct labour hours)	$ 50,000	$10,000
Expected Machine Hours	$10,000	$50,000
Actual Direct Labour Hours	$51,000	$9,000
Actual Machine Hours	$10,500	$52,000

During the year, several jobs were completed. Data pertaining to one such job, Job #77 were as follows:

Direct Materials $20,000

Direct Labour Cost:

Department A (5000 hours @$6.00 per hour) $30,000

Department B (1,000 hours@ $6.00 per hour) $ 6,000

Machine hours used:

Department A 100

Department B 1,200

Units Produced 10,000

___________________________________________________________________________

Forrester Company uses a plantwide predetermined overhead rate to assign overheads to jobs. Direct Labour hours (DLH) are used to compute the predetermined overhead rate.

Required:

1. Calculate the predetermined overhead rate:

2. Using the predetermined overhead rate, compute the per-unit manufacturing cost for Job #77.

3. Recalculate the unit manufacturing cost for Job #77 using departmental overhead rates. Use Direct Labour Hours for Department A and machine Hours for Department B.

Explain why this approach provides a more accurate unit cost.