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White Company has two departments, Cutting and Finishing. The company uses job-order costing and computes a predetermined overhead rate in each department. The Cutting Department
White Company has two departments, Cutting and Finishing. The company uses job-order costing 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 | 8,800 | 66,000 |
Machine-hours | 51,200 | 3,700 |
Total fixed manufacturing overhead cost | $ 390,000 | $ 437,000 |
Variable manufacturing overhead per machine-hour | $ 4.00 | 0 |
Variable manufacturing overhead per direct labor-hour | 0 | $3.75 |
Required:
- Compute the predetermined overhead rate for each department.
- The job cost sheet for Job 203, which was started and completed during the year, showed the following:
Department | ||
---|---|---|
Cutting | Finishing | |
Direct labor-hours | 4 | 16 |
Machine-hours | 83 | 5 |
Direct materials | $ 790 | $ 360 |
Direct labor cost | $ 100 | $ 400 |
Using the predetermined overhead rates you computed in requirement (1), compute the total manufacturing cost assigned to Job 203.
- 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?
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