Q6 White Company has two departments, Cutting and Finishing. The company uses a
ID: 2332662 • Letter: Q
Question
Q6
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 Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour 84,000 2,800 390,000 419,000 6,200 64,900 $2.00 $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 Machine-hours Direct materials Direct labor cost 18 86 $720 $ 84 $380 $378Explanation / Answer
Requirement 1
Cutting Department
(A)
Total Fixed Overheads
$ 390,000.00
(B)
Total machine Hours
64900
(A/B)
Predetermined Overhead rate
$ 6.01
Finishing Department
(A)
Total Fixed Overheads
$ 419,000.00
(B)
Total Labor Hours
84000
(A/B)
Predetermined Overhead rate
$ 4.99
Answer
Department
Finishing
Predetermined Overhead Rate
$ 6.01
per MH
$ 4.99
Per DLH
Requirement 2
First total manufacturing overheads of both department will be calculated and once it is done manufacturing cost can be calculated by adding material and labor cost.
Manufacturing overheads for Job 203
Overheads of Cutting Department
Fixed Overheads Applied
(A)
Machine Hours
86
(B)
Predetermined Overhead rate
$ 6.01
C= (AxB)
Fixed Overheads Applied
$ 516.80
(D)
Machine Hours
86
(E)
Rate per Machine Hour
$ 2.00
F=(DxE)
Variable manufacturing Overheads
$ 172.00
(C+F)
Total manufacturing Overheads for Cutting Department
$ 688.80
Overheads of Finishing Department
Fixed Overheads Applied
(A)
Labor Hours
18
(B)
Predetermined Overhead rate
$ 4.99
C= (AxB)
Fixed Overheads Applied
$ 89.79
(D)
Labor Hours
18
(E)
Rate per Labor Hour
$ 2.75
F=(DxE)
Variable manufacturing Overheads
$ 49.50
(C+F)
Total manufacturing Overheads for Finishing Department
$ 139.29
Calculation of Total Manufacturing Cost
Cutting
Finishing
Total
Direct Material
$ 720.00
$ 380.00
$ 1,100.00
Direct Labor
$ 84.00
$ 378.00
$ 462.00
Manufacturing Overheads
$ 688.80
$ 139.29
$ 828.08
Total manufacturing Cost
$ 1,492.80
$ 897.29
$ 2,390.08
Answer
Total Manufacturing cost = 2390.08
Requirement 1
Cutting Department
(A)
Total Fixed Overheads
$ 390,000.00
(B)
Total machine Hours
64900
(A/B)
Predetermined Overhead rate
$ 6.01
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