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Matthew Stike, the new controller of Central Manufacturing Company (CMC) believes that the company should use the dual rate method of allocating overhead costs of
Matthew Stike, the new controller of Central Manufacturing Company (CMC) believes that the company should use the dual rate method of allocating overhead costs of its Materials Management Department to its Machining and Assembly Departments instead of the single rate method, which the company has used since its inception 20 years ago. Stike's Materials Management Department has an annual capacity of 6,500 labor-hours and a budgeted fixed cost of $286,000. The budgeted variable cost per labor-hour of the Materials Management Department is $17. Stike gathers the following information: (Click the icon to view the information.) \begin{tabular}{cccc} & MachiningDepartment & AssemblyDepartment & Total \\ \hline Budgeted usage of Materials & 1,200 & 4,000 & 5,200 \\ Management labor-hours & & & \\ Actual usage of Materials & 1,100 & 3,800 & 4,900 \\ Management labor-hours & & & \end{tabular} Requirement 2. Using the dual-rate method, compute the amount allocated to the Machining and Assembly Departments when (a) the budgeted fixed-cost rate is calculated using budgeted fixed costs and practical capacity of the Materials Management Department, (b) fixed costs are allocated based on the budgeted fixed-cost rate and budgeted usage of Materials Management Department services by the Machining and Assembly Departments, and (c) variable costs are allocated using the budgeted variable-cost rate and actual usage. (Round the rate per item to the nearest cent.)
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