Question

Diewold Company has two departments, Milling and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Milling Department bases its rate on machine-hours, and the Assembly 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 Department Milling Assembly 6.700 83,000 61,900 3,600 390,000 $ 459,000 4.00 3.75 $ $ Required: 1. Compute the predetermined overhead rate to be used in each department. (Round your answers to 2 decimal places.) Department Milling Assembly Predetermined overhead rate per MH per DLH 2. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 407, which was started and completed during the year, showed the following: Department Assembly 11 Direct labor-hours Machine-hours Materials requisitioned Direct labor cost Milling 5 87 780 44 $ $ $ 6 350 150 Compute the total manufacturing cost assigned to Job 407. (Round your intermediate and final answers to 2 decimal places.) Total manufacturing cost 3. Would you expect substantially different amounts of overhead cost to be charged to some jobs if the company used a plantwide overhead rate based on direct labor-hours instead of using departmental rates? O Yes No

Answer 1

1) Overhead rate

	Milling	Assembly
Overhead rate	(390000/61900+4) = 10.30 per MH	(459000/83000+3.75) = 9.28 per DLH

2) Total manufacturing cost

Direct material (780+350)	1130
Direct labor (44+150)	194
Milling overhead (87*10.30)	896.10
Assembly overhead (11*9.28)	102.08
Total manufacturing cost	2322

3) Yes