Exercise 3-13 (Algo) Departmental Predetermined Overhead Rates [LO3-1, LO3-2, LO3-4]

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:

	Department
	Cutting		Finishing
Direct labor-hours		8,100		79,000
Machine-hours		59,900		2,000
Total fixed manufacturing overhead cost	$	360,000	$	433,000
Variable manufacturing overhead per machine-hour	$	3.00
Variable manufacturing overhead per direct labor-hour			$	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				12
Machine-hours			80				3
Direct materials		$	780			$	350
Direct labor cost		$	105			$	252

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?

1 -

Compute the predetermined overhead rate for each department. (Round your answers to 2 decimal places.)

	Department
	Cutting		Finishing
Predetermined overhead rate		per MH		per DLH

2 -

Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned to Job 203. (Round intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

	Total manufacturing cost

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?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2