# 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-hours. At the beginning of the year, the company made the following estimates:  Department CuttingFinishingDirect labor-hours 7,600 65,000Machine-hours 52,000 3,100Total fixed manufacturing overhead cost\$400,000\$561,000Variable 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 job cost sheet for Job 203, which was started and completed during the year, showed the following:  Department CuttingFinishingDirect labor-hours  5   15 Machine-hours  89   5 Direct materials \$770  \$380 Direct labor cost \$115  \$345   Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned 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 predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

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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-hours. At the beginning of the year, the company made the following estimates:

 Department Cutting Finishing Direct labor-hours 7,600 65,000 Machine-hours 52,000 3,100 Total fixed manufacturing overhead cost \$ 400,000 \$ 561,000 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 job cost sheet for Job 203, which was started and completed during the year, showed the following:

 Department Cutting Finishing Direct labor-hours 5 15 Machine-hours 89 5 Direct materials \$ 770 \$ 380 Direct labor cost \$ 115 \$ 345

Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned 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 predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

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Step 1

Computation of estimated cost of cutting department

Step 2

Computation of estimated cost of finishing department:

Step 3

Computation of predetermined overhead rate of cutting department:

Note: Predetermined ov...

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