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Solution:

Regardless of what cost system is installed, three changes should be made in the company's methods:

A control should be established over materials. Requisitions should be used.

Factory overhead should be segregated between the two divisions. Direct departmental charges should be made as much as possible. Common costs should be apportioned to each department on an equitable basis.

Clock cards should be balanced with employees' time sheets.

If these matters are resolved satisfactorily, the costs might be obtained as follows:

- Machine Shop

The product seems to be custom item so that job costing seems appropriate. Overhead should be charged to the product on some predetermined basis.

- Plastic Division

It seems that job order costing system is also possible here. The overhead might be charged to the product on different bases if the machine used would suggest different rates. This might make possible the creation of cost centers.

- General

Any cost system should permit comparison with estimated figures.

Meantime you should also be considered in other relevant articles:

Measuring Direct Materials Cost in Job Order Costing System

Measuring Direct Labor Cost in Job Order Costing System

Application of Manufacturing Overhead

Job Order Costing System--The Flow of Costs

Multiple Predetermined Overhead Rates

Under-applied overhead and over-applied overhead calculation

Disposition of any balance remaining in the manufacturing overhead account at the end of a period

Predetermined Overhead Rate and Capacity

Recording Non-manufacturing Costs

Recording Cost of Goods Manufactured and Sold

Job Order Costing in Services Companies

Use of Information Technology in Job Order Costing

Advantages and Disadvantages of Job Order Costing System

Job Order Costing Discussion Questions and Answers

Job Order Costing Exercises

Case Studies

结论——CONCLUSION

This paper concludes by giving substantiations to distinguish between process costing and job order costing and identify companies that would use each costing method, should be able to identify the documents used in job order costing system and compute predetermined overhead rates and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.

As you know the flow of costs in a job order costing system and prepare appropriate journal entries to record costs. It should be apply overhead cost to work in process (WIP) using a predetermined overhead rate, prepare a schedule of cost of goods manufactured and cost of goods sold and also prepare T-accounts to show the flow of costs in a job order costing system.

Eventually to explain the implications of basing the predetermined overhead rate on activity at capacity rather than on estimated activity for the period.