John~ the management accountant has implemented a job-order costing system for Fridge-R—Fun using
predetermined overhead rates. For this part, the focus is on two different processes in Fridges-R-Fun.
namely. welding the pipes to the compressor and assembling the fridges. The predetermined overhead rate for welding is based on machine-hours and the predetermined overhead rate for assembly is based on direct labour—hours. John has compiled the following estimates for Year 1:
Considering the industry benchmark for the overhead for assembly is 75% of direct labour cost, identify whether this specific job has an overhead for assembly lower or higher than a job using the industry benchmark. Explain what could cause a difference between this specific job and the industry benchmark for the assembly overhead cost.