Managerial Accounting

Grange Company has two departments, Stamping and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Stamping Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labour cost. At the beginning of the year, the company made the following estimates: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 sheetfor Job 407, which was started and completed during the year, shows the following: Work in Process, ending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished Goods, ending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of Goods Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overhead applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 32,800 41,000 336,200 $410,000 Department Stamping Assembly Direct labour-hours . . . . . . . . . . . . . . . . . . . . . . . Machine-hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing overhead cost.. . . . . . . . . . . . . Direct labour cost . . . . . . . . . . . . . . . . . . . . . . . .40,000 300,000 $2,550,000 $360,000125,000 15,000 $4,000,000 $3,200,000 gar24903_ch05_152-211.indd Page 190 26/08/14 6:53 PM user /207/MHR00249/gar24903_disk1of1/1259024903/gar24903_pagefiles 190 Chapter 5 Systems Design: Job-Order Costing Department Stamping Assembly Direct labour-hours . . . . . . . . . . . . . . . . . . . . . . . . 25 100 Machine-hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 20 Materials requisitioned. . . . . . . . . . . . . . . . . . . . . $400 $1,850 Direct labour cost. . . . . . . . . . . . . . . . . . . . . . . . . . $250 $800 Compute the total overhead cost applied to Job 407.3.

Would you expect substantially different amounts of overhead cost to be charged to somejobs if the company used a plantwide overhead rate based on direct labour cost instead of using departmental rates? Explain. No computations are necessary.

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