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 labor hours. At the beginning of the year, the company made the following estimates: Department Cutting Finishing Direct labor-hours 7,500 67,899 Machine-hours 66,000 3,100 Total fixed manufacturing overhead cost $400,000 $555,000 Variable manufacturing overhead per nachine-hour $ 2.00 - Variable manufacturing overhead per direct labor- - $ 4.75 hour Required: 1. Compute the predetermined overhead rate for each department 2. The job cost sheet for Job 203, which was started and completed during the year, showed the following: Department Cutting Finishing le Direct labor-hours Machine-hours Direct materials Direct labor cost $740 $360 $200 $ 60 Using the predetermined overhead rates that you computed in requirement (Il compute the total manufacturing cost assigned to Job 203 3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates? Complete the question by entering your answers in the tabs given below. Required: Required 2 Required)

Answer 1

Cutting Finishing 7500 67000 66000 3100 | 400000 Direct labor hour Machine Hours Fixed Manufacturing overhead cost Fixed Manufacturing overheads Rate : (400000/66000, 555000/67000) ADD: Variable overhead rate Perdetermined overhead rate 6.06 8.28 2.00 8.06 Cutting 8.06 4.75 13.03 Finishing 13.03 Predetermined overhead rate 85 Cutting Finishing Direct labor hour Machine Hours Manufacturing overheads : Rate * Base 685 130 Cutting Finishing Overhead Cost Applied 685.10 130.30 Direct Material 740 360 Direct Labor cost 60 200 Manufactruing Cost 1485 690 Total overhead Cost applied 2175 Does Substncially differen OH if Plantwide overhead rate YES based on direct labor Hours

Answers Predetermined overhead rate Total overhead ocst applied Cutting Finishing 8.06 13.03 2175 Does Substncially differen OH if Plantwide overhead rate YES