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EXERCISE 3-15 Departmental Overhead Rates (L03-1, L03-2, LO3-3] 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: Direct labor-hours ..... Machine-hours .......... .......... . Total fixed manufacturing overhead cost ........... Variable manufacturing overhead per machine-hour ....... Variable manufacturing overhead per direct labor-hour ..... Department Cutting Finishing 6,000 30,000 48,000 5,000 $264,000 $366,000 $2.00 $4.00 Required: 1. Compute the predetermined overhead rate to be used in each department. 2. Assume that the overhead rates that 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 20 Direct labor-hours .......... Machine-hours ...... Materials requisitioned ....... Direct labor cost ...... 6 80 $500 $70 $310 $150 ............. 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 overhead rate based on direct labor-hours, rather than using departmental rates? Explain. No computations are necessary

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