Bobcat Company has two departments, milling and assembly. The company uses a job-order cost 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 cost. At the beginning of the year, the company made the following estimates: Department Milling 8,000 60,000 P510,000 P800,000 72,000 Assembly 75,000 3,000 Direct labor-hours Machine-hours Manufacturing overhead cost Direct labor cost 640,000 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 123, which was stated and completed during the year, showed the following: Department Assembly 20 Milling Direct labor-hours Machine-hours 90 Materials requisitioned P800 P370 Direct labor cost 45 160 Compute the total overhead cost applied to job 123. 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 cost instead of using departmental rates? Explain. No computations are necessary.
Bobcat Company has two departments, milling and assembly. The company uses a job-order cost 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 cost. At the beginning of the year, the company made the following estimates: Department Milling 8,000 60,000 P510,000 P800,000 72,000 Assembly 75,000 3,000 Direct labor-hours Machine-hours Manufacturing overhead cost Direct labor cost 640,000 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 123, which was stated and completed during the year, showed the following: Department Assembly 20 Milling Direct labor-hours Machine-hours 90 Materials requisitioned P800 P370 Direct labor cost 45 160 Compute the total overhead cost applied to job 123. 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 cost instead of using departmental rates? Explain. No computations are necessary.
Chapter4: Job Order Costing
Section: Chapter Questions
Problem 2PA: York Company Is a machine shop that estimated overhead will be $50,000, consisting of 5,000 hours of...
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