Question

# White Company has two departments: cutting and finishing. The company uses a job-order costing system and...

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 6,500 34,500 Machine-hours 48,750 4,500 Manufacturing overhead cost \$ 487,500 \$ 553,500 Direct labour cost \$ 65,000 \$ 307,500

Required:

1. Compute the predetermined overhead rate to be used in each department. (Round your answers to 2 decimal places.)

 Department Cutting Finishing Predetermined overhead rate per MH % of DLC

2. Assume that the overhead rates that you computed in Requirement (1) 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 8 25 Machine-hours 75 5 Materials requisitioned \$ 540 \$ 350 Direct labour cost \$ 88 \$ 165

Compute the total overhead cost applied to job 203. (Do not round intermediate calculations and round your answer to 2 decimal places.)

3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide overhead rate based on direct labour cost, rather than using departmental rates?

• Yes

• No

 1. Computation of Predetermined Overhead Rate Particular Cutting Department Finishing Department Overhead Cost (A) \$487,500.00 \$553,500.00 Direct Labor Cost (B) 307500 Machine Hours (B) 48750 Predetermined Overhead Rate (A/B) \$10.00 180% 2. Computation of amoiunt of Overhead Applied to job-203 Cutting Department Finishing Department Driver (a) 75 165 Predetrmined Overhead Rate (as Calculated above) (b) \$10.00 180% Applied Overhead cost (aXb) \$750.00 \$297.00

Part-3

Yes

 Plant Wide Overhead Rate = Estimated overhead / Estimated Direct labour Cost =(487500+553500)/(65000+307500)=279.46% Applied Overhead on Job 306 as per Plant wide overhead Rate = (88+165)*279.46%=\$707 Applied Overhead on Job 306 as per Departmental overhead Rate = (750+297)=\$1047

#### Earn Coins

Coins can be redeemed for fabulous gifts.