Reference no: EM132697031

Questions -

Q1. 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 5,000 21,000

Machine-hours 45,000 3,000

Manufacturing overhead cost $382,500 $498,000

Direct labour cost $75,000 $323,400

Required - Compute the predetermined overhead rate to be used in each department.

Q2. 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 6 20

Machine-hours 80 4

Materials requisitioned $500 $380

Direct labour cost $85 $320

Required - Compute the total overhead cost applied to job 203.

Q3. 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?