You skipped this question in the previous attempt White Comp

You skipped this question in the previous attempt. White Company has two departments, Cutting and 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: Finishing. The company uses a job-order costing system and computes a 2,580 370,80e 456,eee Machine-hours 68,800 Total fixed manufacturing overhead cost Variable nanufacturing overhead per nachine-hour 3.00 overhead per direct labor-hour 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 Direct labor-hours Hachine-hours Direct materials Direct labor cost 729 % 370 $ 138 $322 ed overhead rates that you computed in requirement (). compute the total manufacturing cost assigned to Job substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide 203. oe

Solution

Answer 1.

Cutting Department:

Estimated Manufacturing Overhead = Fixed Manufacturing Overhead + Variable Manufacturing Overhead per MH * Number of MH
Estimated Manufacturing Overhead = $370,000 + $3.00 * 68,000
Estimated Manufacturing Overhead = $574,000

Predetermined Overhead Rate = Estimated Manufacturing Overhead / Number of MH
Predetermined Overhead Rate = $574,000 / 68,000
Predetermined Overhead Rate = $8.44 per MH

Finishing Department:

Estimated Manufacturing Overhead = Fixed Manufacturing Overhead + Variable Manufacturing Overhead per DLH * Number of DLH
Estimated Manufacturing Overhead = $456,000 + $2.75 * 74,000
Estimated Manufacturing Overhead = $659,500

Predetermined Overhead Rate = Estimated Manufacturing Overhead / Number of MH
Predetermined Overhead Rate = $659,500 / 74,000
Predetermined Overhead Rate = $8.91 per DLH

Answer 2.

Cutting Department:

Overhead applied = 80 * $8.44
Overhead applied = $675.20

Total Manufacturing Cost = Direct Materials + Direct Labor + Overhead applied
Total Manufacturing Cost = $720 + $138 + $675.20
Total Manufacturing Cost = $1,533.20

Finishing Department:

Overhead applied = 14 * $8.91
Overhead applied = $124.74

Total Manufacturing Cost = Direct Materials + Direct Labor + Overhead applied
Total Manufacturing Cost = $370 + $322 + $124.74
Total Manufacturing Cost = $816.74

Total Overhead Cost applied to Job 203 = $1,533.20 + $816.74
Total Overhead Cost applied to Job 203 = $2,349.94

Answer 3.

They will be subject to less overhead cost, if they use Plantwide rate based on Direct Labor Cost.