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Testo Esercizio Orange Engineering Company
Testo Esercizio Orange Engineering Company
The Orange Engineering Company Ltd. is divided into three manufacturing departments. All work
is carried out according to customer’s order. The budgeted costs for 2006 were as follows:
It was anticipated that machine hours worked would be 20,000 in Department 1, 16,000 in
Department 2 and 4,000 in Department 3.
During 2006, manufacturing overhead was applied to jobs processed on the basis of direct labour
costs, using a predetermined rate calculated on a factory-wide basis. The company is now
considering switching to individual departmental rates, using machine hours as the basis in
Departments 1 and 2 and labour costs as the basis in Department 3.
The actual material and labour costs of producing a particular order job number 321 during 2006
were as follows:
Dept. 2 € 1,000
The job required 220 machine hours in Department 1, 160 in Department 2 and 50 in Department 3.
a) Calculate the total manufacturing cost of job number 321, using the factory-wide overhead rate
actually employed by the company during 2006.
b) Calculate the total manufacturing cost of job number 321, using departmental overhead rates in
the manner now under consideration by the company