White Company has two departments, Cutting and Finishing.
The company uses a job-order costing system and computes a predetermined overhead rate for each department. The Cutting Department bases its rate on machine-hours and the Finishing Department bases its rate on direct labor-hours.
At the beginning of the year, the company made the following estimates:
Department
Cutting Finishing
Direct labor-hours 7,700 43,000
Machine-hours 43,400 1,900
Total fixed manufacturing overhead cost $390,000 $496,000
Variable manufacturing overhead per machine-hour $2.00
Variable manufacturing overhead per direct labor-hour $3.75
Compute the predetermined overhead rate for each department.
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