- Troma Company’s manufacturing operation is divided into two departments. Department A is an assembly department. The assembly department uses robotic equipment to construct the company’s products. Department B is a packaging and shipping department. This department is labor intensive and requires a large number of workers to prepare the products for delivery. The company has total overhead cost of $300,000 for the year. Expected machine and labor consumption patterns are as follows:
Machine Hours Labor Hours Labor Cost
Department A 27,000 6,000 $120,000
Department B 3,000 14,000 $168,000
Total 30,000 20,000 $288,000
Company management places great emphasis on cost control. Managers who are able to minimize their department’s cost are rewarded with bonuses. Based on this information, what cost driver should the manager of Department B recommend to allocate total overhead?
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