Chapter 4, Problem 4.9E

Departmental Overhead Rates [LO4-1, LO4-2, LO4-3]

Diewold Company has two departments, Milling and Assembly _ The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Milling Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates:

Required:

1. Compute the predetermined overhead rate to be used in each department.
2. Assume that the overhead rates you computed in requirement 1 are in effect The job cost sheet for Job 407: which was started and completed during the year, showed the following:



Compute the total manufacturing cost assigned 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-hours instead of using departmental rates? Explain. No computations are necessary.