“Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost th
ID: 2333127 • Letter: #
Question
“Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $4,000. It seems we’re either too high to get the job or too low to make any money on half the jobs we bid.”
Teledex Company manufactures products to customers’ specifications and operates a job order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labor cost. The following estimates were made at the beginning of the year:
Jobs require varying amounts of work in the three departments. The Koopers job, for example,
would have required manufacturing costs in the three departments as follows:
Compute the rate for the current year.
Determine the amount of manufacturing overhead cost that would have been applied to
the Koopers job.
Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:
Determine the amount of manufacturing overhead cost that would have been applied to
the Koopers job.
Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead).
What was the company's bid price on the Koopers job if a plantwide overhead rate had been used to apply overhead cost?
What would the bid price have been if departmental overhead rates had been used to apply overhead cost?
At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year.
Department
Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used.
Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. (Enter overapplied overhead costs as negative amounts and underapplied overhead costs as positive amounts.)
“Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $4,000. It seems we’re either too high to get the job or too low to make any money on half the jobs we bid.”
Explanation / Answer
1 a) Computation of plantwide overhead rate for the Current Year Estimated Total Manufacturing Overhead $ 869,400.00 Estimated Direct Labor $ 621,000.00 plantwide overhead rate for the Current Year $ 1.40 b) Caclulation of amount of manufacturing overhead cost that would have been applied to the Koopers job. Total Labor cost for Koopers Job $ 11,600.00 plantwide overhead rate for the Current Year $ 1.40 manufacturing overhead cost $ 16,240.00 2 a) Computation of separate predetermined overhead rate in each department. Fabricating Machining Assembly Estimated Total Manufacturing Overhead $ 362,250.00 $ 414,000.00 $ 93,150.00 Estimated Direct Labor $ 207,000.00 $ 103,500.00 $ 310,500.00 plantwide overhead rate for the Current Year $ 1.75 $ 4.00 $ 0.30 b) Caclulation of amount of manufacturing overhead cost that would have been applied to the Koopers job. Fabricating Machining Assembly Total Total Labor cost for Koopers Job $ 4,200.00 $ 500.00 $ 6,900.00 plantwide overhead rate for the Current Year $ 1.75 $ 4.00 $ 0.30 manufacturing overhead cost $ 7,350.00 $ 2,000.00 $ 2,070.00 $ 11,420.00 4 a Calculation of Company's bid price on the Koopers job if a plantwide overhead rate had been used to apply overhead cost Direct materials $ 6,000.00 Direct labor $ 11,600.00 Manufacturing overhead $ 16,240.00 Total Manufacturing Cost $ 33,840.00 Company Bid Price which is 150% of Manufacturing Cost $ 50,760.00 b) Calculation of bid price have been if departmental overhead rates had been used to apply overhead cost Fabricating Machining Assembly Total Direct materials $ 3,700.00 $ 200.00 $ 2,100.00 $ 6,000.00 Direct labor $ 4,200.00 $ 500.00 $ 6,900.00 $ 11,600.00 Manufacturing overhead $ 7,350.00 $ 2,000.00 $ 2,070.00 $ 11,420.00 Total Manufacturing Cost $ 15,250.00 $ 2,700.00 $ 11,070.00 $ 29,020.00 Company Bid Price which is 150% of Manufacturing Cost $ 43,530.00 5 a Calculation of underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. Actual Overhead Costs $ 888,600.00 Applied overhead cost ($601,000 x 1.4) $ 841,400.00 Underapplied overhead cost $ 47,200.00 b Calculation of underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Fabricating Machining Assembly Total Actual Overhead Costs $ 371,000.00 $ 432,000.00 $ 85,600.00 $ 888,600.00 Applied overhead cost $ 379,750.00 $ 460,000.00 $ 80,700.00 $ 920,450.00 (Overapplied)/Underapplied overhead cost $ (8,750.00) $ (28,000.00) $ 4,900.00 $ (31,850.00)
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