White Company has two departments, Cutting and Finishing. The company uses a job

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 6,000 69,700 Direct labor-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour 66,000 3,100 $380,000 524,000 $ 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 Department Cutting Finishing Direct labor-hours Machine-hours Direct materials Direct labor cost 16 90 $730 $100 $370 $ 320 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?

Explanation / Answer

Cutting Finishing 1 Predetermined Overhead rate Departmental overhead cost/Machine hours Departmental overhead cost/Direct labor hours (380000/69700) (524000/66000) 5.45 7.94 Per machine hour Per direct labor hour 2 Calculation of Total manufacturing cost Cutting Finishing Total Direct material 730 370 1100 Direct labor cost 100 320 420 Manufacturing overhead cost 491 127 618 Total Manufacturing cost 1321 817 2138 3 Yes, there is sustantial difference as the usage of thedrivers has huge difference and allocation depends on them.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.