Systems Design: Job-Order Costing

Dahra Sushmita Uy Limbo

LO5]  White Companny has two departments. and the Finishing Department bases its rate on direct labor cost. Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rates in each department. . The Cutting Department bases its rate on machine-hours. LO3. 3-20 [LO2.Departmental Overhead Rates Ex.

000 $360. the company made the following estimates: Department Cutting Finishing Direct labor-hours Machine-hours Manufacturing overhead cost Direct labor cost 6.000 48.000 $270.000 $486.000 $50.000 .000 5.000 30. At the beginning of the year.

Predetermined overhead rate to be used in each department  Cutting Department: Predetermined Estimated total manufacturing overhead cost overhead rate =  Finishing Department: .

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Yes. for example. they would be charged substantially less overhead cost if a plantwide rate based on direct labor cost were used. . if some jobs require a large amount of machine time and little labor cost. It appears. but required only a small amount of labor cost. that this would be true of Job 203 which required considerable machine time to complete. 3.

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