Upon review of the Company’s operations you find that it has two departments, assembly and machine shop. Analyzing the overhead accounts, you find…

Upon review of the Company’s operations you find that it has two departments, assembly and machine shop.  Analyzing the overhead accounts, you find the following situation:  

Department            Projected Overhead Costs                 Projected Direct Labor

Assembly                $1,800,000                                         165,000

Machine Shop         $2,000,000                                          50,000

1. If a department rate were used, what amount of overhead would be allocated to the proposed contract ________________?  Plant-wide rate____________?

2.  What rate should the buyer use?  Plant-wide rate  _____________   Department rate_______________

3.  Would there be any limitations on using either rate? 

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