Grange Company has two departments, Stamping and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Stamping Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labour cost. At the beginning of the year, the company made the following estimates:

Required:
1. Compute the predetermined overhead rate to be used in each department.
2. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 407, which was started and completed during the year, shows the following:

Compute the total overhead cost applied to Job 407.
3. Would you expect substantially different amounts of overhead cost to be charged to some jobs if the company used a plantwide overhead rate based on direct labour cost instead of using departmental rates? Explain. No computations are necessary.

Transcribed Image Text:

Department Stamping 40,000 300,000 $2,550,000 Assembly 125,000 15,000 $4,000000 $3,200000 Direct labaur-hours.... Machine-hours.. Manufacturing overhead cost.. Direct labaur cost $360,000