Whatty Company has two departments, Cutting and Finishing. The company uses a job-order costing system and...

 

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Whatty Company has two departments, Cutting and Finishing. The company uses a job-order costing system and calculates 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-hours. At the beginning of the year, the company made the following estimates: Direct labour-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour variable manufacturing overhead per direct labour-hour Required: Direct labour-hours Machine-hours Materials requisitions Direct labour cost Cutting 6,000 48,000 R264,000 R2.00 2.1. Calculate the predetermined overhead rate to be used in each department. 2.2. Assume that the overhead rate that you calculated in (2.1) above are in effect. The job cost sheet for Job 203, which was started and completed during the year, showed the following: Department Cutting 6 80 R500 R70 Finishing 30,000 5,000 R366,000 Finishing 20 4 R310 R150 R4.00 Calculate the total manufacturing cost assigned to Job 203. 2.3. 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-hours, rather than using departmental rates? Explain. No calculations are necessary. Whatty Company has two departments, Cutting and Finishing. The company uses a job-order costing system and calculates 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-hours. At the beginning of the year, the company made the following estimates: Direct labour-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour variable manufacturing overhead per direct labour-hour Required: Direct labour-hours Machine-hours Materials requisitions Direct labour cost Cutting 6,000 48,000 R264,000 R2.00 2.1. Calculate the predetermined overhead rate to be used in each department. 2.2. Assume that the overhead rate that you calculated in (2.1) above are in effect. The job cost sheet for Job 203, which was started and completed during the year, showed the following: Department Cutting 6 80 R500 R70 Finishing 30,000 5,000 R366,000 Finishing 20 4 R310 R150 R4.00 Calculate the total manufacturing cost assigned to Job 203. 2.3. 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-hours, rather than using departmental rates? Explain. No calculations are necessary.

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21 Finishing 30 000 5 000 R6 per direct labourhour Cutting 48 000 6 000 R8 per machinehour The company has two departments Cutting and Finishing and t... View the full answer