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Matthew Stike, the new controller of Central Manufacturing Company (CMC) believes that the company should use the dual rate method of allocating overhead costs of its Materials Management Department to its Machining and Assembly Departments instead of the single rate method, which the company has used since its inception 20 years ago. Stike's Materials Management Department has an annual capacity of 6,500 labor-hours and a budgeted fixed cost of $286,000. The budgeted variable cost per labor-hour of the Materials Management Department is $17. Stike gathers the following information: (Click the icon to view the information.) \begin{tabular}{|lccc|} \hline & MachiningDepartment & AssemblyDepartment & Total \\ \hline Budgeted usage of Materials & 1,200 & 4,000 & 5,200 \\ Management labor-hours & & & \\ Actual usage of Materials & 1,100 & 3,800 & 4,900 \\ \hline Management labor-hours & & & \\ \hline \end{tabular} Requirement 1. Using the single-rate method, allocate Materials Management Department costs to the Machining and Assembly Departments in these Start with allocating (a), then (b), and finally (c). (Round the budgeted rate per item to the nearest cent.) Requirement 2. Using the dual-rate method, compute the amount allocated to the Machining and Assembly Departments when (a) the budgeted fixed-cost rate is calculated using budgeted fixed costs and practical capacity of the Materials Management Department, (b) fixed costs are allocated based on the budgeted fixed-cost rate and budgeted usage of Materials Management Departmen services by the Machining and Assembly Departments, and (c) variable costs are allocated using the budgeted variable-cost rate and actual usage. (Round the rate per item to the nearest cent.) Requirement 3. Comment on your results in requirements 1 and 2. Discuss the advantages of the dual-rate method. For each of the scenarios, identify the related allocation method. The Machining Department and Assembly Department know at the start of the year what they will be charged in total for overhead costs. In effect, the Materials Management Department costs becomes a fixed cost for the Machining and Assembly Departments. Then, each may be motivated to over-use the Materials Management Department, knowing that their current year transportation costs will not change. Some advantages of the dual-rate method are: (Select all that apply.) Materials Management Department. The single-rate method therefore avoids the potential conflict of interest that can arise under the dual-rate method. department managers' consideration when making marginal decisions to outsource services. department managers' consideration when making marginal decisions to outsource services. Materials Management Department. The dual-rate method therefore avoids the potential conflict of interest that can arise under the single-rate method. the user departments for support-department services. variable costs and fixed costs behave differently

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