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.)

- Total overhead cost applied:



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

Homework Answers

Answer #1
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

working for your refrence

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
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