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 7,100 62,000 Machine-hours 52,100 2,700 Total fixed manufacturing overhead cost $ 370,000 $ 560,000 Variable manufacturing overhead per machine-hour $ 4.00 — Variable manufacturing overhead per direct labor-hour — $ 2.75 Required: 1. Compute the predetermined overhead rate for each department. Compute the predetermined overhead rate for each department. (Round your answers to 2 decimal places.) Department Cutting Finishing Predetermined overhead rate ____ per MH _____ per DLH 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 4 11 Machine-hours 88 6 Direct materials $ 750 $ 360 Direct labor cost $ 88 $ 242 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? Yes or No?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined
| Department | ||||
| Cutting | Finishing | |||
| Direct labor-hours | 7,100 | 62,000 | ||
| Machine-hours | 52,100 | 2,700 | ||
| Total fixed manufacturing overhead cost | $ | 370,000 | $ | 560,000 |
| Variable manufacturing overhead per machine-hour | $ | 4.00 | — | |
| Variable manufacturing overhead per direct labor-hour | — | $ | 2.75 | |
Required:
1. Compute the predetermined overhead rate for each department.
Compute the predetermined overhead rate for each department. (Round your answers to 2 decimal places.)
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2. The
| Department | ||||||||
| Cutting | Finishing | |||||||
| Direct labor-hours | 4 | 11 | ||||||
| Machine-hours | 88 | 6 | ||||||
| Direct materials | $ | 750 | $ | 360 | ||||
| Direct labor cost | $ | 88 | $ | 242 | ||||
Using the predetermined overhead rates that you computed in requirement (1), compute the total
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?
Yes or No?
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