Assignment:
Department
Milling Assembly
Direct labor-hours 8,000 75,000
Machine-hours 60,000 3,000
Manufacturing overhead cost $510,000 $800,000
Direct labor cost $72,000 $640,000
Required:
1. Compute the predetermined overhead rate to be used in each department.
2. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for 407, which was started out and completed during the year, showed the following:
Department
Milling Assembly
Direct labor-hours 5 20
Machine-hours 90 4
Materials requisitioned $800 $370
Direct labor cost $45 $160
Compute the total overhead cost applied to Job 407.
3. Would you expect substantially different amounts of overhead cost to be charged to some jobs if the company used a plantwide overhead rate based on direct labor cost instead of using departmental rates? Explain. No computations are necessary.