QUESTION 4 (10 MARKS) Earthware Company makes a range of pottery products to sell to the major departmental stores. The company uses a normal job-order costing system and applies manufacturing overhead to jobs using a plantwide overhead rate based on machine hours. At the beginning of the year, Earthware Company has the following estimates: Direct labour hours Machine hours Manufacturing overhead cost Required: Moulding Department 13,600 77,500 $632,000 Painting Department 68,200 9,100 $704,000 (a) Compute the plantwide overhead rate for the company. (b) What was the amount of underapplied or overapplied overhead if the actual manufacturing overhead cost at the end of the year was $1,308,800 and actual machine hours was 85,430? (2 marks) (2 marks) 3 (c) The newly hired accountant suggested using departmental rates to assign overheads to jobs. The rate in the Moulding Department can be based on machine hours and the rate in the Painting Department can be based on direct labour hours. Compute the departmental overhead rates for the two departments and briefly comment on whether this is a good suggestion. (6 marks)

QUESTION 4 (10 MARKS) Earthware Company makes a range of pottery products to sell to the major departmental stores. The company uses a normal job-order costing system and applies manufacturing overhead to jobs using a plantwide overhead rate based on machine hours. At the beginning of the year, Earthware Company has the following estimates: Required: (a) Compute the plantwide overhead rate for the company. (2 marks) (b) What was the amount of underapplied or overapplied overhead if the actual manufacturing overhead cost at the end of the year was $1,308,800 and actual machine hours was 85,430 ? (2 marks) 3 (c) The newly hired accountant suggested using departmental rates to assign overheads to jobs. The rate in the Moulding Department can be based on machine hours and the rate in the Painting Department can be based on direct labour hours. Compute the departmental overhead rates for the two departments and briefly comment on whether this is a good suggestion. (6 marks)