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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 labor-hours. At the beginning of the year, the company made the following estimates: Direct labor-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Department Cutting Finishing 6,000 30,000 48,000 5,000 264,000 $366,000 2.00 - - $ 4.00 $ $ 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 20 8@ Direct labor-hours Machine-hours Direct materials Direct labor cost $ 500 $ 108 $ 310 $ 360 Using the predetermined overhead rates that 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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