case 4 \"Don\'t tell me we\'ve lost another bid!\" exclaimed Sandy Kovallas, pre
ID: 2404572 • Letter: C
Question
case 4
"Don't tell me we've lost another bid!" exclaimed Sandy Kovallas, president of Lenko Products, Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $9,900 on the Hastings job." "I just can’t figure it out," said Kovallas. "It seems we’re either too high to get the job or too low to make any money on half the jobs we bid anymore. What’s happened?"
Lenko Products manufactures specialized goods 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:
Explanation / Answer
Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1a. Predetermined Overhead Rate Estimated Direct Labor 893000 Estimated Manufacturing Overhead 1437730 Predetermined Overhead Rate 1437730/893000 161% 1b. Manufacturing overhead aplied: Direct Labor for Hasting 21300 Hence, Applied Manufacturing overhead 21300*161% 34293 2a. Cutting Machining Assembly Estimated Direct Labor 304000 208000 381000 Estimated Manufacturing Overhead 524000 818730 95000 Predetermined Overhead Rate 172.37% 393.62% 24.93% 2b. Aplied overhead Cutting Machining Assembly Hasting Direct Labor 6600 1700 13000 Predetermined Overhead Rate 172% 394% 25% Applied Overhead 11376 6692 3241 4a. Direct Material 18500 Direct Labor 21300 Manufacturing Overhead (1b) 34293 Total Manufacturing Cost 74093 Bid (150% of Manufacturing Cost) 111140 4b. Direct Material 18500 Direct Labor 21300 Manufacturing Overhead (2b) 21309 Total Manufacturing Cost 61109 Bid (150% of Manufacturing Cost) 91664 5a. Applied Overhead 868000*161% 1397480 Actual Overhead 1482000 Underapplied 84520 5b. Applied Actual Cutting 318000*172% 546960 560000 13040 Underapplied Machining 210000*394% 827400 830000 2600 Underapplied Assembley 340000*25% 85000 92000 7000 Underapplied Total 1459360 1482000 22640 Underapplied
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