Red River Products uses a normal cost, job order costing system. In the Mixing Department, overhead is applied using machine hours; in Paving, overhead is applied using direct labor hours. In December 2007, the company estimated the following data for its two departments for 2008: Mixing Department Paving Department Direct labor hours 6,000 14,000 Machine hours 30,000 6,000Budgeted overhead cost $240,000 $392,000 a. Compute the predetermined OH rate for each department of Red River.b. Job #220 was started and completed during March 2008. The job cost sheet shows the following information: Mixing Department Paving Department
Direct material $22,600 $3,400 Direct labor cost$ 1,250 $4,050 Direct labor hours24 120 Machine hours 160 44
Compute the overhead applied to Job $220 for each department and in total.c.If the company had computed a companywide predetermined OH rate rather than department rates, would such a rate have indicated the actual overhead cost of each job? Explain.