Grange Company has two departments, Stamping and Assembly. The company uses a jo
ID: 2491022 • Letter: G
Question
Grange Company has two departments, Stamping and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Stamping Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labour cost. At the beginning of the year, the company made the following estimates:
Compute the predetermined overhead rate to be used in each department. (Round your stamping department answer to 2 decimal places.)
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, shows the following:
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 labour cost instead of using departmental rates?
Department Stamping Assembly Direct labour-hours 40,000 125,000 Machine-hours 300,000 15,000 Manufacturing overhead cost $ 2,550,000 $ 4,000,000 Direct labour cost $ 360,000 $ 3,200,000Explanation / Answer
Stamping = 2,550,000/300,000
= $8.5 per hour
Assembly = $4,000,000/3,200,000
=1.25 times of direct labor cost
Or 125%
2,Total overhead cost
Stamping 450*8.5
3,825
Assembly 800@125%
1,000
Total overhead
4,825
3.Yes
- Predetermined overhead rate
Stamping = 2,550,000/300,000
= $8.5 per hour
Assembly = $4,000,000/3,200,000
=1.25 times of direct labor cost
Or 125%
2,Total overhead cost
Stamping 450*8.5
3,825
Assembly 800@125%
1,000
Total overhead
4,825
3.Yes
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