Campbell Manufacturing Company uses two departments to make itsproducts. Department I is a cutting department that is machineintensive and uses very few employees. Machines cut and form partsand then place the finished parts on a conveyor belt that carriesthem to Department II, where they are assembled into finishedgoods. The assembly department is labor intensive and requires manyworkers to assemble parts into finished goods. The company’smanufacturing facility incurs two significant overhead costs:employee fringe benefits and utility costs. The annual costs offringe benefits are $264,000 and utility costs are $192,000. Thetypical consumption patterns for the two departments are asfollows:

	Department I	Department II	Total
Machine hours used	15,700	4,300	20,000
Direct labor hours used	5,300	10,700	16,000

The supervisor of each department receives a bonus based on howwell the department controls costs. The company’s current policyrequires using a single allocation base (machine hours or laborhours) to allocate the total overhead cost of $456,000.

Required

1. Assume that you are the supervisor of Department I. Choose theallocation base that would minimize your department’s share of thetotal overhead cost. Calculate the amount of overhead that would beallocated to both departments using the base that you selected.

2. Assume that you are the supervisor of Department II. Choose theallocation base that would minimize your department’s share of thetotal overhead cost. Calculate the amount of overhead that would beallocated to both departments using the base that you selected.

3. Assume that you are the plant manager and have the authority tochange the company’s overhead allocation policy. Formulate anoverhead allocation policy that would be fair to the supervisors ofboth Department I and Department II. Compute the overheadallocations for each department using your policy.

4. 	Department Allocated Cost I II Total

5. 	Department Allocated Cost I II Total

6. 	Costs Department I Department II Fringe benefits Utility Total

7. 	Costs Department I Department II Fringe benefits Utility Total