OL 1OT Departnient is $60,000 (not $33,000). For this company, would you recomme
ID: 2340376 • Letter: O
Question
OL 1OT Departnient is $60,000 (not $33,000). For this company, would you recommer departmental rates over a plantwide rate? (Note: Round overhead rates to the nearest cent Problem 4-57 Overhead Rates, Unit Costs Fosom Company manufactures specialy tools to customer order. There are three produe departments. Departmental information on budgeted overhead and various activity measu for the coming year is as follows: EL Welding Estimated overhead Direct labor hours Direct labor cost Machine hours Assembly $ 62,000 10,000 $150,000 1,000 Finishing $150,000 6,000 $120,000 2,000 $220,000 4,500 $90,000 5,000 Currently, overhead is applied on the basis of machine hours using a plantwide r However, Janine, the controller, has been wondering whether it might be worthwhile to departmental overhead rates. She has analyzed the overhead costs and drivers for the various partments and decided that Welding and Finishing should base their overhead rates on mach hours and that Assembly should base its overhead rate on direct labor hours. Janine has been asked to prepare bids for two jobs with the following information: Job 2 Direct materials Direct labor cost Direct labor hours: 1,800$9,340 $3,100 $6,725 Welding 20 60 20 20 70 Finishing Number of machine hours: Welding Assembly Finishing 50 60 90 50 25 125 The typical bid price includes a 35% markup over full manufacturing cost. Round all overhe rates to the nearest cent. Round all bid prices to the nearest dollar. Required: 1. Calculate a plantwide rate for Folsom Company based on machine hours. What is theb price of each job using this rate? 2. Calculate departmental overhead rates for the producing departments. What is the bid price of each job using these rates? Problem 4-58 Calculate Job Cost and Use It to Calculate PriceExplanation / Answer
Answer 1
Plant wise overhead rate
Total estimated overhead (220000+62000+150000)
432000
Total machine hours (5000+1000+2000)
8000
Plant wise overhead rate (total estimated overhead / total machine hours)
$ 54.00
Job 1
Job 2
Direct material
6725.00
9340.00
Direct labor
1800.00
3100.00
Overhead applied
10800.00
10800.00
Full manufacture cost (total of above)
19325.00
23240.00
Add: profit markup (full manufacture cost * 35%)
6763.75
8134.00
Bid price of job
26088.75
31374.00
Overhead applied = plant wise overhead rate * machine hours total
Machine hours
Job 1
Job 2
Welding
50
50
Assembly
60
25
Finishing
90
125
Total machine hours
200
200
Plant wise overhead rate
54
54
Overhead applied (plant wise overhead rate * total machine hours)
10800
10800
Answer 2
Departmental overhead rate
Welding
Assembly
Finishing
Estimated overhead
220000
62000
150000
Basis of applied overhead
Machine hours
Labor hours
Machine hours
Applicable hours
5000
10000
2000
Departmental overhead rate (estimated overhead / applicable hours)
$ 44.00
$ 6.20
$ 75.00
Job 1
Job 2
Welding (machine hours * 44) (job 1 =50*44) (job 2= 50*44)
2200.00
2200.00
Assembly (labor hours * 6.20) (job 1 =60*6.20) (job 2= 20*6.20)
372.00
124.00
Finishing (machine hours * 75) (job 1 =90*75) (job 2= 125*75)
6750.00
9375.00
Total overhead applied
9322.00
11699.00
Direct material
6725.00
9340.00
Direct labor
1800.00
3100.00
Total overhead applied
9322.00
11699.00
Full manufacture cost (total of above)
17847.00
24139.00
Add: profit markup (full manufacture cost * 35%)
6246.45
8448.65
Bid price of job
24093.45
32587.65
Plant wise overhead rate
Total estimated overhead (220000+62000+150000)
432000
Total machine hours (5000+1000+2000)
8000
Plant wise overhead rate (total estimated overhead / total machine hours)
$ 54.00
Job 1
Job 2
Direct material
6725.00
9340.00
Direct labor
1800.00
3100.00
Overhead applied
10800.00
10800.00
Full manufacture cost (total of above)
19325.00
23240.00
Add: profit markup (full manufacture cost * 35%)
6763.75
8134.00
Bid price of job
26088.75
31374.00
Overhead applied = plant wise overhead rate * machine hours total
Machine hours
Job 1
Job 2
Welding
50
50
Assembly
60
25
Finishing
90
125
Total machine hours
200
200
Plant wise overhead rate
54
54
Overhead applied (plant wise overhead rate * total machine hours)
10800
10800
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