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 6,000 67,000
Machine-hours 56,600 3,400
Total fixed manufacturing overhead cost $ 380,000 $ 404,000
Variable manufacturing overhead per machine-hour $ 3.00
Variable manufacturing overhead per direct labor-hour $ 2.75
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 3 13
Machine-hours 43 4
Direct materials 745 370
Direct labor costs 43 210

Answer 1

Instructions are below.

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate for each department:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Cutting= (380,000/56,600) + 3= $9.71 per machine hour

Finishing= (404,000/67,000) + 2.75= $8.78 per direct labor hour

Now, we can calculate the total cost of Job 203:

Cutting Finishing

Direct labor-hours 3 13

Machine-hours 43 4

Direct materials 745 370

Direct labor costs 43 210

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Cutting= 9.71*43= $417.53

Finishing= 8.78*13= $114.14

Total cost= (745 + 370) + (43 + 210) + (417.53 + 114.14)

Total cost= $1,899.67