Based on the distribution of labor hours and machine hours in Exhibit 4-2, the cutting
department is labor intensive, and the printing department is machine intensive.
Moreover, the overhead costs of the cutting department are almost 43 percent of those
of the printing department. Based on these observations, it could be argued that departmental
overhead rates would reflect the consumption of overhead better than would
a plantwide rate. If true, product costs would be more accurate. This approach would
yield the following departmental rates, using direct labor hours for the cutting department
and machine hours for the printing department