FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined
Department
Cutting Finishing
Direct labor-hours 6,700 80,000
Machine-hours 51,400 3,300
Total fixed manufacturing overhead cost $ 380,000 $ 430,000
Variable manufacturing overhead per machine-hour $ 3.00 —
Variable manufacturing overhead per direct labor-hour — $ 3.75
Required:
1. Compute the predetermined overhead rate for each department.
2. The
Department
Cutting Finishing
Direct labor-hours 3 12
Machine-hours 90 3
Direct materials $ 780 $ 350
Direct labor cost $ 69 $ 276
Using the predetermined overhead rates that you computed in requirement (1), compute the total
3. 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 labor-hours, rather than using departmental rates?
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