Bayshore Limited has the following cost data. They use a job-order costing system.

Department Z Department Y

Budgeted overhead $200,000 $1,000,000

Actual overhead $220,000 $1,040,000

Expected activity (direct labour hours) 100,000 20,000

Expected machine hours 20,000 100,000

Actual direct labour hours 102,000 18,000

Actual machine hours 21,000 104,000

Job 18

$

Direct materials 40,000

Direct labour cost

Department Z ( 10,000 hours at $6.00 per hour) 60,000

Department Y ( 2,000 hours at $6.00 per hour) 12,000

Machine hours used:

Department Z 200

Department Y 2,400

Units produced 20,000

Bayshore Limited uses a plantwide, predetermined overhead rate to assign overhead to jobs. Direct labour hours is used to compute the predetermined overhead rate.

Required:

1. Compute the predetermined overhead rate.
2. Using the predetermined rate. Compute the per-unit manufacturing cost for Job 18.
3. Compute the overhead variance for the year and label it as over or under-applied .

Recalculate the unit manufacturing cost for Job 18 using departmental overhead rates. Use direct labour hours for Department Z and machine hours for Department Y. Does this approach provide a more accurate unit cost? Explain.