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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

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:

 Milling Assembly Direct labor-hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 80,000 Machine-hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 3,000 Total fixed manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . \$390,000 \$500,000 Variable manufacturing overhead per machine-hour . . . . . . . . . . . . \$2.00 — Variable manufacturing overhead per direct labor-hour . . . . . . . . . . — \$3.75

Required:

1.       Compute the predetermined overhead rate to be used in each department.

2.       Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 407, which was started and completed during the year, showed the following:

 Direct labor-hours . . . . . . . . . . . . . . . . . . 5 20 Machine-hours . . . . . . . . . . . . . . . . . . . . 90 4 Materials requisitioned . . . . . . . . . . . . . . \$800 \$370 Direct labor cost . . . . . . . . . . . . . . . . . . . \$45 \$160

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.

Jun 30 2020 View more View Less