Garvey's Fine Furnishings manufactures upscale custom furniture. Garvey's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,070,000 of manufacturing overhead to individual jobs. However, Dede Howards, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $630,000 of manufacturing overhead while the Finishing Department incurs $440,000 of manufacturing overhead. Howards has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department.

Garvey's Fine Furnishings manufactures upscale custom furniture. Garvey's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,070,000 of manufacturing overhead to individual jobs. However, Dede Howards, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $630,000 of manufacturing overhead while the Finishing Department incurs $440,000 of manufacturing overhead. Howards has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department