a. To compute the predetermined overhead rate for each department, we need to divide the budgeted overhead cost by the estimated allocation base for each department.
For the Mixing Department:
Predetermined Overhead Rate = Budgeted Overhead Cost / Machine Hours
= $240,000 / 30,000
= $8 per machine hour
For the Paving Department:
Predetermined Overhead Rate = Budgeted Overhead Cost / Direct Labor Hours
= $392,000 / 14,000
= $28 per direct labor hour
b. To compute the overhead applied to Job #220 for each department and in total, we need to multiply the predetermined overhead rate by the actual allocation base usage for each department.
For the Mixing Department:
Overhead Applied = Predetermined Overhead Rate * Machine Hours
= $8 per machine hour * 160 machine hours
= $1,280
For the Paving Department:
Overhead Applied = Predetermined Overhead Rate * Direct Labor Hours
= $28 per direct labor hour * 120 direct labor hours
= $3,360
In total:
Overhead Applied = Overhead Applied in Mixing Department + Overhead Applied in Paving Department
= $1,280 + $3,360
= $4,640
c. If the company had computed a companywide predetermined overhead rate rather than department rates, such a rate would not have indicated the actual overhead cost of each job. This is because different departments may have different cost drivers or allocation bases that drive their overhead costs. Using a single companywide predetermined overhead rate would not accurately allocate overhead costs to individual jobs in different departments.