Reference no: EM13482232

The Gonzalez Company uses a job order costing system at its plant in Green Bay, Wisconsin. The plant has a machining department and a finishing department. The company uses two cost driver rates for allocating manufacturing support costs to job orders: one on the basis of machine hours for allocating machining department support costs and the other on the basis of direct labor cost for allocating the finishing department support costs. Estimates for 2006 follow:

                                                     Machining Department                    Finishing Department

Manufacturing support cost                      500,000                                    400,000

Machine Hours                                            20,000                                     2,000

Direct Labor hours                                         5,000                                     22,000

Direct Labor Cost                                       150,000                                  500,000

a. Determine the two departmental support cost driver rates.

b. During July 2006, cost records for job 511 show the following:

                                                            Machining Department                Finishing Department

Direct materialscost                                  12,000                                       2,000

Direct laborcost                                             300                                       1,200

Direct laborhours                                         10                                              50

Machinehours                                                 80                                             8

Determine the total costs charged to job 511 in July 2006.

c. Explain why Gonzalez Company uses two different costdriver rates in its job costing system.