Question
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
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
CuttingFinishingDirect labor-hours6,00030,000Machine-hours48,0005,000Total fixed manufacturing overhead cost$264,000$366,000Variable manufacturing overhead per machine-hour$2.00Variable manufacturing overhead per direct labor-hour$4.00
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