Question

Chec 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 Department Cutting Finishing 7,789 90, eee 60,400 1,400 $ 390,000 $ 484, eee $ 3.00 $ 2.75 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: Direct labor-hours Machine-hours Direct materials Direct labor cost Department Cutting Finishing 3 12 85 5 $ 700 $ 370 $ 54 $ 216

Answer 1

Answer might be slightly different due to rounding of predermined overhead rate.

Part 1

	Cutting	Finishing
Appropriate base	machine hour	labor hour
Fixed Manufacturing overhead	$       390,000	$   404,000
Divided by: appropriate hours base	60,400	90,000
Fixed Manufacturing overhead per appropriate hour	$              6.46	$          4.49
Variable Manufacturing overhead per appropriate hour	$              3.00	$          2.75
Predermined overhead rate (rounded to two decimals)	$              9.46	$          7.24

Part 2

	Cutting	Finishing	Finishing
Appropriate base	machine hour	labor hour
Predermined overhead rate	$              9.46	$          7.24
Multiply: appropriate hours base for job	85	12
Overhead applied to job	$         804.10	$        86.88
Direct material	$         700.00	$     370.00
Direct labors	$            54.00	$     216.00
Overhead applied to job	$         804.10	$        86.88
Total costs	$      1,558.10	$     672.88	$ 2,230.98
Job cost of Job 203			$ 2,230.98