Question

White Company has two departments: cutting and finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The cutting department bases its rate on machine-hours, and the finishing department bases its rate on direct labour cost. At the beginning of the year, the company made the following estimates:

	Department
	Cutting			Finishing
Direct labour-hours		6,300			34,300
Machine-hours		48,250			4,300
Manufacturing overhead cost	$	472,850		$	544,500
Direct labour cost	$	63,000		$	302,500

Required:

1.	Compute the predetermined overhead rate to be used in each department. (Round your answers to 2 decimal places.)

      

2.	Assume that the overhead rates that you computed in part (1) are in effect. The job cost sheet for job 203, which was started and completed during the year, showed the following:

	Department
	Cutting			Finishing
Direct labour-hours		8			25
Machine-hours		85			5
Materials requisitioned	$	520		$	330
Direct labour cost	$	88		$	163

Compute the total overhead cost applied to job 203. (Do not round intermediate calculations and round your answer to 2 decimal places.)

      

3.	Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide overhead rate based on direct labour cost, rather than using departmental rates?
	Yes No

Answer 1

Direct labor hour Machine Hours Direct labor Cost Manufacturing overhead cost Manufacturing overheads Rate : (472850/48250, 544500/302500) Cutting Finishing 6300 34300 48250 4300 63000 302500 472850 544500 9.80 1.80 Cutting Finishing 9.80 1.80(or) 180% Predetermined overhead rate Cutting Finishing 8 25 Direct labor hour Machine Hours Direct Labor Cost Manufacturing overheads : Rate * Base 85 2 88 163 833 293 Cutting Finishing 833.00 293.40 1126.40 Overhead Cost Applied Total overhead ocst applied Does Substncially differen OH if Plantwide overhead rate based on direct labor cost YES