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:

Required:

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

2. Assume that the overhead rates that you computed in part (1) are in effect. The job cost sheet for job 203, which was started and completed during the year, showed the following:

3. 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? Explain your answer. No computations are necessary.

Transcribed Image Text:

Department Finishing Cutting Direct labour-hours 21,000 5,000 Machine-hours 45,000 3,000 Manufacturing overhead cost $382,500 $499,500 Direct labour cost $ 75,000 $270,000 Department Cutting Finishing Direct labour-hours 20 Machine-hours 4 90 Materials requisitioned $500 $380 Direct labour cost $ 85 $250