Xanning company manufactures specialty tools to customer orders. There are three producing departments. Departmental information on budgeted overhead and various activity measures for the coming year is as follows.

Welding Assembly Finishing

Estimated overhead $200000 $22000 $250000

Direct labour hours $4500 $10000 $6000

Direct labour cost $90000 $150000 $120000

Machine hours $5000 $1000 $2000

Currently overhead is applied on the basis of machine hours using a plantwide rate. However, Janine, the controller, has been wondering whether it might be worthwhile to use departmental overhead rates. She has analyzed the overhead costs and drivers for the various departments and decided that welding and finishing should base their overhead rates on machine hours and that assembly should base its overhead rate on direct labour hours.

Department A Department B

Overhead costs (estimated) $2,660,000 $924,000

Normal activity (machine hours) $140,000 $84,000

1. Calculate 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. Job 73 used 40 machine hours from department A and 60 machine hours from department B. Job 74 used 60 machine hours from department A and 40 machine hours from department B. Compute the overhead cost assigned to each job using the plantwide rate. Also, compute the overhead cost using the departmental overhead rate. Which one is the fairer assignment and why?