(Departmental overhead rates) The Lunford Paving Company uses a predeter¬ mined overhead rate to apply overhead to jobs, and the company employs a job order costing system. Overhead is applied to jobs in the Mixing Department based on the number of machine hours used, whereas Paving Department over¬ head is applied on the basis of direct labor hours. In December 1997, the com¬ pany estimated the following data for its two departments for 1998:

a. Compute the predetermined overhead rate that should be used in each de¬ partment of the Lunford Paving Company.

b. Job #116 was started and completed during March 1998, The job cost sheet shows the following information:

c. Compute the overhead applied to Job #116 for each department and in total.

d. If the company had computed a companywide rate for overhead rather than departmental rates, do you feel that such a rate would be indicative of the actual overhead cost of each job? Explain.LO1

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Direct labor hours Machine hours Budgeted overhead cost MIXING DEPARTMENT PAVING DEPARTMENT 1,000 7,500 3,500 1,500 $60,000 $98,000