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 6,200 85,000 68,900 1,100 $390,000 $477,000 Direct labor-hours Machine-hours Total fixed manufacturing " overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor- hour 3.00 - $ 3.75 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: 15 Department cutting Finishing Direct 3 labor-hours Machine- 813 hours Direct $720 $350 materia Direct labor S 63 5315 COSE Using the predetermined overhead rates that you computea in requirement (1), compute the total manufacturing cost signed to Job 203 B Would you expect substantia y derent amounts of overhead cost to be assigned to some jobs the company used p ide predetermined overhead rate based on direct aborHours rather than using departmentaletes

Answer 1

Part 1: Pre determined overhead rate: 8.66 per MH cutting Dept estimated overhead/estimated machline hours (390000+68900*3)/68900 9.36 per DLH Finising Dept-estimated overhead/estimated labor hours (477000+85000*3.75/85000 Part 2: Job 203 720.00 350.00 Direct material cutting Finishing Direct labor cutting Finishing Manufacturing overhead cutting =81*8.66 Finishing=15*9.36 Total manfuacturing cost 63.00 315.00 701.46 140.40 2,289.86 Part 3: Yes, as both are different methods.