White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead
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 labor cost. At the beginning of the year, the company made the following estimates:
1. Compute the predetermined overhead rate to be used in each department.
2. 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.
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 labor cost, rather than using departmental rates? Explain. No computations arenecessary.
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