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Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs

ID: 2330775 • Letter: E

Question

Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]

[The following information applies to the questions displayed below.]

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:

  

  

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:

  

  

Delph had no underapplied or overapplied manufacturing overhead during the year.

Exercise 2-15 Part 1

Required:

1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.

c. If Delph establishes bid prices that are 140% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200?

d. What is Delph’s cost of goods sold for the year?

Molding Fabrication Total Machine-hours 31,000 41,000 72,000 Fixed manufacturing overhead costs $ 740,000 $ 210,000 $ 950,000 Variable manufacturing overhead cost per machine-hour $ 5.50 $ 5.50

Explanation / Answer

Answer:

1a

The estimated total manufacturing overhead cost is computed as follows:

Y = $950,000 + ($5.50 per MH)(72,000 MHs)

Estimated fixed manufacturing overhead

950,000

Estimated variable manufacturing overhead:
$5.500 per MH × 72,000 MHs

396000

Estimated total manufacturing overhead cost

1,346,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead

1,346,000

÷ Estimated total machine-hours (MHs)

72000

MHs

Predetermined overhead ratw

18.69

per MH

______________________________________________________

b & C

Total manufacturing cost assigned to Jobs D-70 and C-200:

D-70

C-200

Direct materials

700,000

520,000

Direct labor

390,000

430,000

Manufacturing overhead applied
($18.69 per MH × 31,000 MHs; )

579390

766290

Total manufacturing cost

1,669,390

1,716,290

1c. Bid prices for Jobs D-70 and C-200:

D-75

C-200

Total manufacturing cost

1,669,390

1,716,290

× Markup percentage (150%)

140%

140%

Bid price

2337146

2402806

__________________________________________________

D :

What is Delph’s cost of goods sold for the year?

Because the company has no beginning or ending inventories and only Jobs D-70 and C-200 were started, completed, and sold during the year, the cost of goods sold is equal to the sum of the manufacturing costs assigned to both jobs of $3,385,680 (=1669390+1716290)

Estimated fixed manufacturing overhead

950,000

Estimated variable manufacturing overhead:
$5.500 per MH × 72,000 MHs

396000

Estimated total manufacturing overhead cost

1,346,000