Question: 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 65,000 Machine-hours 56,300 1,800 Total fixed manufacturing overhead cost $ 370,000 $ 432,000 Variable manufacturing overhead per machine-hour $ 2.00 - Variable manufacturing overhead per direct labor-hour - $ 2.75
Required: 1. Compute the predetermined overhead rate to be used in each department. (Round your answers to 2 decimal places.) Predetermined Overhead Rate _____per MH_____DLH
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: Department Cutting Finishing Direct labor-hours 6 19 Machine-hours 84 4 Materials requisitioned $ 770 $ 370 Direct labor cost $ 44 $ 160 Compute the total manufacturing cost assigned to Job 203. (Round your intermediate and final answers to 2 decimal places.) Total Manufacturing Cost______
3. Would you expect substantially different amounts of overhead cost to be charged to some jobs if the company used a plant wide overhead rate based on direct labor-hours instead of using departmental rates?