Question

question 17

Exercise 2-13 Departmental Predetermined Overhead Rates (LO2-1, LO2-2, LO2-4) 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: Direct labor-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour rect labor-hour Department Cutting Finishing 8,900 81,000 59,200 2,700 $ 380,000 $ 459,000 $ 3.00 $ 4.75 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 Direct labor-hours Machine-hours Direct materials Direct labor cost $ 770 $72 $360 $432 Using the predetermined overhead rates that you computed in requirement (1), 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 1 Required 2 Required 3 Compute the predetermined overhead rate for each department. (Round your answers to 2 decimal places.) Department Cutting Predetermined overhead rate Finishing per DLH per MH

Answer 1

Answer:

1.)

cutting department:
Y=380000+3(59200)
=557600 estimated total manufacturing overhead cost
predetermined overhead rate = 557600/59200= 9.42 per machine hour

Finishing Department:
Y=459000+4.75 (81000)
=843750 estimated total manufacturing overhead cost
Predetermined overhead rate = 843750/81000 = 10.42 per direct labor hour

2.)

	Cutting	Finishing	Total
Direct materials	770	360	1130
Direct labor	72	432	504
Manufacturing Overhead*	763	188	951
Total Manufacturing	1605	980	2585

Working:
Calculation of manufacturing overhead:
cutting = 81 machine hours x 9.42 = 763.02 or 763
Finishing = 18 machine hours x 10.42 = 187.56 or 188

3.)
Yes, The overhead cost assigned to some jobs would be would be substantially different if company used plant wide predetermined overhead rate based on direct labor hours rather than departmental rates.