Question

White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and compresa 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: Cutting in 55,800 3. Total Fin est rechead coat Variable tacturing overhead per machine Required: 1. Compute the predetermined overhand rate for each department 2. The job cost sheet for Job 203, which was started and completed during the year showed the following: Cutting Finishing Direct labor-hours Machor Direet stariato Direct labor coat Using the predetermined overhead rates that you computed in requirement 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. Red Required Rered Compute the predetermined overhead rate for each department. (Round your answers to 2 decimal places) < Prev 2 of 11 Ill Next >

Answer 1

1) Calculation of Predetermined overhead rate

Cutting= Total manufacturing overhead cost/Machine hours+Variable manufacturing overhead per machine hour

= $370000/55800+$2.00= $8.63 per MH

Finishing= Total manufacturing overhead cost/Labor hours+Variable manufacturing overhead per direct labor hour

= $505000/73000+$3.75= $10.67 per DLH

2) Calculation of Total manufacturing cost assigned to Job 203

	Total manufacturing costs
Direct materials ($750+380)	$1130
Direct labor cost ($90+216)	306
Overhead applied (86*$8.63+12*$10.67)	870
Total manufacturing costs	$2306

Total manufacturing costs= $2306

3) Yes, if the company used a plantwide predetermined overhead rate based on direct labor-hours rather than using department rates the amount of overhead cost assigned to the Jobs would be different.