White Company has two departments, Cutting and Finishing. The company uses a job - order costing system
Question:
White Company has two departments, Cutting and Finishing. The company uses a joborder costing system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machinehours, and the Finishing Department bases its rate on direct laborhours. At the beginning of the year, the company made the following estimates:
Department
Cutting Finishing
Direct laborhours
Machinehours
Total fixed manufacturing overhead cost $ $
Variable manufacturing overhead per machinehour $
Variable manufacturing overhead per direct laborhour $
Required:
Compute the predetermined overhead rate for each department.
The job cost sheet for Job which was started and completed during the year, showed the following:
Department
Cutting Finishing
Direct laborhours
Machinehours
Direct materials $ $
Direct labor cost $ $
Using the predetermined overhead rates that you computed in requirement compute the total manufacturing cost assigned to Job
Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct laborhours, rather than using departmental rates?
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer