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 8,700 83,000 Machine-hours 63,300 3,700 Total fixed manufacturing overhead cost $ 360,000 $ 567,000 Variable manufacturing overhead per machine-hour $ 3.00 - Variable manufacturing overhead per direct labor-hour - $ 4.75 Required:
1. Compute the predetermined overhead rate to be used in each department. (Round your answers to 2 decimal places.)
2. Assume that the overhead rates 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:
3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plant wide overhead rate based on direct labor-hours, rather than using departmental rates?