Thomas Company uses a job costing system at its plant. The plant has two production departments – Machining and Assembly. Its job-costing system has two direct cost categories (direct materials and direct manufacturing labour) and two manufacturing overhead cost pools (the Machining Department, allocated using machine hours and the Assembly Department, allocated using direct manufacturing labour costs). The 2012 budget for the plant is as follows:

Machining Dept.:-

Manufacturing Overhead =$1,800,000
Direct manufacturing labour cost =$1,400,000
Direct manufacturing labour hours =$ 100,000
Machine hours =$ 50,000


Assembly Dept.:-

Manufacturing Overhead =$3,600,000
Direct manufacturing labour cost = $2,000,000
Direct manufacturing labour hours =$ 200,000
Machine hours = $ 200,000

Question:

a) Calculate an overhead rate for each department.

My Solution: Am I Right?

Machining Dept.
1,800,000 overhead / 50,000 machine hours = $36 per machine hour

Assembly Dept.
3,600,000 overhead / 2,000,000 labor costs = $1.80 per $1 labor costs