Question

George Bush is the owner of a tie company that manufactures designer ties such as its most popular models, the Kerry and the Edwards. The ties go through three processes: cutting, sewing, and packaging. The company uses a job order cost system and computes a predetermined overhead rate in each department. The cutting department bases its rate on direct materials, the sewing department bases its rate on machine hours, and the packaging department bases its rate on direct labor hours. At the beginning of the year, the company made the following estimates:

Department

Cutting Sewing Packaging

Direct labor hours 10,000 25,000 20,000

Machine hours 12,000 12,000 13,000

Direct materials $34,000 $12,000 $6,000

Manufacturing overhead $68,000 $84,000 $70,000

The following actual costs and data are provided for Job 53, the Bill Clinton order:

Department

Cutting Sewing Packaging

Direct labor hours 200 100 50

Machine hours 60 100 40

Direct materials $4,000 $300 $1,200

Instructions

A. Compute the predetermined overhead rate to be used in each department during the upcoming year.

B. Assume the overhead rates that you computed in A. above are in effect. Compute the total overhead cost to be assigned to Bill Clintons orderJob 53.