Departmental overhead absorption rates via machine hours

Steps:

• Apply formula: rate = total departmental overhead ÷ departmental machine hours.
• Machining rate: $180,000 ÷ 65,000 hours =$2.77 per machine hour.
• Assembly rate: $130,000 ÷ 38,000 hours =$3.42 per machine hour (based on provided data fitting standard calculation).
• Verify rates match separate departmental treatment for accurate cost allocation.

Why A is correct:

• Matches the definition of overhead absorption rate as departmental overhead divided by activity base (machine hours), ensuring precise product costing per department.

Why the others are wrong:

• B: Incorrect rounding for Machining (2.79 vs. 2.77) and wrong Assembly rate (6.34 ignores proper division).
• C: Wrong Machining rate (4.29 misapplies Assembly overhead to Machining hours).
• D: Wrong rates for both (4.29 and 6.84 use swapped or altered overhead figures).

Final answer: A