Goodwin Company uses a normal job-order costing system. Currently, a plantwide overhead rate based on direct labour is used. Sarah Lindsay, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Some jobs spend most of their time in Department A, while others spend most of their time in Department B. Goodwin Company has the following data for its two departments for the coming year: $\begin{array}{lrr}&\text { Department A }&\text { Department B }\
\text { Expected ov erhead cost } & \$ 75,000 & \$ 33,000 \
\text { Expected direct labour hours } & 30,000 & 24,000
\end{array}$ A. Compute the plantwide overhead rate.
B. Compute the departmental overhead rates. (Carry out your answers to three decimal places.)
C. Which overhead rate would you recommend, and why?

Question

Quizplus · Accepted Answer

The Answer of Goodwin Company uses a normal job-order costing system. Currently, a plantwide overhead rate based on direct labour is used. Sarah Lindsay, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Some jobs spend most of their time in Department A, while others spend most of their time in Department B. Goodwin Company has the following data for its two departments for the coming year: $\begin{array}{lrr}&\text { Department A }&\text { Department B }\
\text { Expected ov erhead cost } & \$ 75,000 & \$ 33,000 \
\text { Expected direct labour hours } & 30,000 & 24,000
\end{array}$ A. Compute the plantwide overhead rate.
B. Compute the departmental overhead rates. (Carry out your answers to three decimal places.)
C. Which overhead rate would you recommend, and why?

Goodwin Company Uses a Normal Job-Order Costing System A Compute the Plantwide Overhead Rate