connect Homework Question 7 of 7 value 100 points Exercise 2

connect Homework Question 7 (of 7) value 100 points Exercise 215 Departmental Overhead Rates [LO2-1, L2-2, L02-31 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 Department Direct labor-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour4.00 Variable manufacturing overhead per direct labor-hour Cutting Finishing 6,10089,000 58,3003,100 $ 380,000 $ 580,000 S3.75 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 per DLH 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: 2.

Solution

1. Cutting Department: = $380,000/$58,300 MHs = $6.52 per MH

Finishing Department = $580,000/333,750 direct labor cost = 173.78% direct labor cost

2.

3. Yes, if they use a plantwide rate based on direct labor cost and if the jobs has longer machine hours and small amount of labor cost they will be charged less overhead cost.

	Overhead Applied
Cutting Department: 83MHs x $6.52 per MH	541.16
Finishing Department: $170 x 173.78%	295.43
Total Overhead Cost Applied	836.59