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:
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:
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?
| Department | ||||
| Cutting | Finishing | |||
| Direct labor-hours | 8,700 | 68,000 | ||
| Machine-hours | 62,900 | 3,600 | ||
| Total fixed manufacturing overhead cost | $ | 360,000 | $ | 552,000 |
| Variable manufacturing overhead per machine-hour | $ | 3.00 | — | |
| Variable manufacturing overhead per direct labor-hour | — | $ | 4.75 | |
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 | 4 | 17 | ||||||
| Machine-hours | 81 | 3 | ||||||
| Direct materials | $ | 700 | $ | 360 | ||||
| Direct labor cost | $ | 76 | $ | 323 | ||||
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?
