Poseidon Company produces customized sailboats. The company uses a job order costing system. Its plant has two production departments: cutting and machining.

The departments have direct material and direct labor costs, in addition to overhead costs.

The estimated manufacturing overhead cost and direct labor cost for each department for fol Cutting Machining Ttotal

Manufacturing Overhead cost $600,000 $800,000 $1,400,000

Direct labor cost $300,000 $200,000 $500,000

Part 1: Assume that a single, plant-wide predetermined manufacturing cost driver rate based on direct labor cost is used. Using the information above, determine the manufacturing cost driver rate the company would use.

The company received an invitation from Duluth Sailing Company to bid on an order of five luxury sailboats. This Duluth Job would require direct manufacturing costs in the two departments as follows:

Using the Cost Driver rate determined above allocate overhead and determine the cost of the job.

	Cutting	Machining	Total
Direct material cost	$12,000	$800	$12,800
Direct labor cost	$7,000	$2,000	$9,000
MOH Applied
Total Cost

Part 2: Assume that separate, departmental predetermined manufacturing cost driver rates based on direct labor costs for both departments, (separately). Determine the separate departmental manufacturing cost driver rates and manufacturing overhead costs applied to the Duluth job.

Using the Cost Driver rate determined above allocate overhead to the departments and determine the cost of the job.

	Cutting	Machining	Total
Direct material cost	$12,000	$800	$12,800
Direct labor cost	$7,000	$2,000	$9,000
MOH Applied
Total Cost