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?