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p-dg Ch.2 Homework View Favorites Tools Help N.com-Hotmail Out. b Supgested Sies- a dj outlook Web App If o Noifications ADPESA 3rd Party ESH University Question 7 (ot ) value: 100 points Exercise 2-15 Departmental Overhead Rates [L02-1, LO2-2, LO23] 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 Cuting 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: Departm Direct labor-hours Machine-hours Total fxed Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Cutting Finishing 6,100 89,000 58,300 3,100 380,000 $ 580,000 overhead cost 4.00 $3.75 Required: 1. Compute the predetermined overhead rate to be used in each department. (Round your answers to 2 decimal places.) partment Cutting Finishing Predetermined overhead rate per DLH per MH 2 Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 203, which was started and completed during the year, showed the following Department Finishing 13 Direct labor-hours Machine-hours Materials requisitioned Direct labor cost 83 S 790 $ 350 $ 38 S 170

Solution

1) Calculation of Predetermined Overhead Rate :-

a) Cutting Department :-

= (Fixed Manufacturing Cost / Machine Hours) + Variable Cost per hour

= ($380000 / 58300) + $4

= $6.52 + $4

= $10.52 per machine hour

b) Finishing Department :-

= (Fixed Manufacturing Cost / Direct Labor Hours) + Variable Cost per hour

= ($580000 / 89000) + $3.75

= $6.52 + $3.75

= $10.27 per direct labor hour

2). Calculation of Total Manufacturing Cost :-

Manufacturing Overhead :-

Cutting Dept. = 83h * $10.52 = $873.16

Finishing Dept. = 13h * $10.27 = $133.51

Total Manufacturing Cost of Job 203 = $1701.16 + $653.51 = $2354.67

3) Yes

Particulars	Cutting Department	Finishing Department
Direct Material Cost	$790	$350
Direct Labor Cost	$38	$170
Manufacturing Overhead	$873.16	$133.51
Total Manufacturing Cost	$1701.16	$653.51