EXERCISE 320 Departmental Overhead Rates [LO2, LO3, LO5] 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 cost. At the beginning of the year, the company made the following estimates: Department Cutting finishing Direct labor hours 6,000 30,000 Machine hours 48,000 5,000 Manufacturing overhead cost 360,000 486,000 Direct labor cost 50,000 270,000 Required: 1. Compute the predetermined overhead rate to be used in each department. 2. Assume that the overhead rates that you computed in (1) above are in effect. The job cost sheet for Job 203, which was started and completed during the year, showed the following: Department Cutting finishing Direct labor hours 6 20 Machine hours 80 5 Manufacturing overhead cost 500 310 Direct labor cost 70 150 Compute the total overhead cost applied to Job 203. 3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plant wide overhead rate based on direct labor cost, rather than using departmental rates? Explain. No computations are necessary