Exercise 2-13 Departmental Predetermined Overhead Rates

White Company has two departments, Cutting and Finishing. The Company uses a job-order costing system and

Computes apredetermined 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

1.) Perdetermine overhead rate Cutting Finishing

Direct labor-hours 8,600 73,000

Machine-hours 70,000 3,500

Total fixed manufacturing overhead cost $390,000.00 $409,000.00

Variable manufacturing overhead per machine-hour $4.00 ?

Variable manufacturing overhead per direct labor-hours ? $4.75

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 5 14

Machine-hours 83 5

Direct materials $750.00 $370.00

Direct labor cost $115.00 $322.00

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

overhead rate base on direct labor-hours, rather than using department rates?