Practice Example $1$:

White Company has two departments, Cutting and Finishing. The company uses a job$-$order cost

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 labor cost. At the beginning of the year, the company made the following estimates:

Required:

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

Assume that the overhead rates that you computed in $(1)$ above are in effect. The job cost

sheet for job $203,$ which was started and completed during the year, showed the following:

Compute the total overhead cost applied to Job $203.$

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 labor cost, rather than

using departmental rates? Explain. No computations are necessary.