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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 labour cost. At the beginning of the year, the company made the following estimates: |
Department | |||
Cutting | Finishing | ||
Direct labour-hours | 5,300 | 43,800 | |
Machine-hours | 43,900 | 5,800 | |
Manufacturing overhead cost | 342,420 | 361,000 | |
Direct labour cost | 53,800 | 180,500 | |
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Required: | ||
1. | Compute the predetermined overhead rate to be used in the Cutting Department. (Round your answer to 2 decimal places.) | |
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Compute the predetermined overhead rate to be used in the Finishing Department. (Round your answer to the nearest per cent.) | ||
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2. | Assume that the overhead rates that you computed in Question 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 labour-hours | 4 | 40 | ||
Machine-hours | 70 | 7 | ||
Materials requisitioned | 70 | 280 | ||
Direct labour cost | 70 | 160 | ||
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Compute the total overhead cost applied to Job 203. (Round your answer to the nearest pound.) | ||
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3. | Would different amounts of overhead cost be assigned to some jobs if the company used a plantwide overhead rate based on direct labour cost, rather than using departmental rates? No computations are necessary. |
multiple choice
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