Question

White company has two departments, cutting in finishing. The company uses a job-order costing system and computers a predetermined overhead right in each department the cutting department bases its rights on machine-hours, and the finishing department basis it's rates on direct labor-hours. At the beginning of the year, the company made the following estimates:

Direct labor-hours - $8,800 | $69, 000

Machine-hours 58,800 | 2,300

Total fixed manufacturing overhead cost - $380,000 | $484,000

Variable manufacturinf overhead per machine-hour - $4.00 | _

Variable manufacturing overhead per direct labor-hour- _ | 2.75

1. Compute the predetermined overhead rate of each department.

2. The job cost sheet for job 203, which was started and completed during the year, show the following:

Direct labor-hours - 3 | 16

Machine-hours - 81 | 4

Using the predetermined overhead rates that you computer and requirement (1), Compute the total manufacturing costs assigned to job 203

3. Would you expect substantially different amount of overhead cost to be assigned some charge of the company used to play it while predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

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 8,800 69,000 58,800 2,300 $380,000 S 484,000 S4.00 - $ 2.75 Required: 1. Compute the predetermined overhead rate for each department. 2. The job cost sheet for Job 203, which was started and completed during the year, showed the following: Department Cutting Finishing Directo r Direct labor cost. 720 to the predetermined overhead rates that you computed requirement compute the total manufacturing cost assigned to Jo Do you expect b Ovo y derent amounts of overhead cost to be assigned to some jobs if the company used a plantwide d onocobolous other than using departmental rates

Answer 1

manufacturing 3,80,000 first of all we shall calculate total cost incurred Dept. I ($) Dept. II ($) cutting dept. finishing dept. 0 Total fixed 4,84,000 overhead Cost" 2. Variable man: overhead (Machine hours x rate) 235200 (58800X4) (Labour hours Xrate) 189.750 (69000X2.75) total 615200 673750 Overhead rate total cost incurred total cost inewoored machine hours Labour hours 2 615200 673750 358 800 69000 - 119.46] approx. 19.76) approx 2. Total manufacturing cost assigned to job 203 cutting dep. finishing depi fixed cost 3180,000 4,84,000 Variable Cost 4762800 (58800X81) (69000 X 16) 1104000 Total cost [4800800 ( 158 8000