The following information applies to the questions displayed below.] Smithson Co
ID: 2437663 • Letter: T
Question
The following information applies to the questions displayed below.]
Smithson 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-75 and Job C-100. It provided the following information related to those two jobs:
Smithson had no overapplied or underapplied manufacturing overhead during the year.
Assume Smithson uses a plantwide overhead rate based on machine-hours.
Required:
1-a. Compute the predetermined plantwide overhead rate. (Round your answer to 2 decimal places.)p
1-b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100. (Round your intermediate calculations to 2 decimal places.)
1-c. If Smithson establishes bid prices that are 120% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100? (Round your intermediate calculations to 2 decimal places.)
1-d. What is Smithson’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places.)
Molding Fabrication Total Machine-hours 28,000 38,000 66,000 Fixed manufacturing overhead costs $ 710,000 $ 290,000 $ 1,000,000 Variable manufacturing overhead per machine-hour $ 5.00 $ 5.00Explanation / Answer
Part 1a)
Calculation of Predetermined Overhead Rate
Molding
Fabrication
(A)
Fixed Overheads
$ 710,000.00
$ 290,000.00
(B)
Machine Hours Total
28000
38000
(A/B)
Predetermined Overhead rate
$ 25.36
$ 7.63
Predetermined Overhead rate
Molding
$ 25.36
Fabrication
$ 7.63
Part 1b)
Calculation of Total manufacturing cost
D-75
Molding
Fabrication
Total
Direct material Cost
$ 372,000.00
$ 322,000.00
$ 694,000.00
Direct Labor Cost
$ 240,000.00
$ 160,000.00
$ 400,000.00
Variable Manufacturing Overheads(Machine hours *5)
$ 90,000.00
$ 50,000.00
$ 140,000.00
Fixed manufacturing Overheads*(Working note 1)
$ 456,428.57
$ 76,315.79
$ 532,744.36
Total Manufacturing Cost
$ 1,158,428.57
$ 608,315.79
$ 1,766,744.36
C-100
Molding
Fabrication
Total
Direct material Cost
$ 270,000.00
$ 260,000.00
$ 530,000.00
Direct Labor Cost
$ 140,000.00
$ 280,000.00
$ 420,000.00
Variable Manufacturing Overheads(Machine hours *5)
$ 50,000.00
$ 140,000.00
$ 190,000.00
Fixed manufacturing Overheads*(Working note 1)
$ 253,571.43
$ 213,684.21
$ 467,255.64
Total Manufacturing Cost
$ 713,571.43
$ 893,684.21
$ 1,607,255.64
Total Manufacturing Cost
D 70
$ 1,766,744.36
C-200
$ 1,607,255.64
*Working note 1 Fixed manufacturing overhead
Molding
Fabrication
Total
D-70
(18000*25.36)
$ 456,428.57
(10000*7.63)
$ 76,315.79
$ 532,744.36
C-200
(10000*25.36)
$ 253,571.43
(28000*7.63)
$ 213,684.21
$ 467,255.64
$ 710,000.00
$ 290,000.00
$ 1,000,000.00
Part 1c)
Calculation of Bid Price
D-75
C-100
Total Manufacturing Cost
$ 1,766,744.36
$ 1,607,255.64
Markup
120%
120%
Bid Price (Total manufacturing cost*220%)
$ 3,886,837.59
$ 3,535,962.41
Bid Price
D-70
$ 3,886,837.59
C-200
$ 3,535,962.41
Part 1d)
Calculation Cost Of goods sold
D 75
C-100
Total
Direct material Cost
$ 694,000.00
$ 530,000.00
Direct Labor Cost
$ 400,000.00
$ 420,000.00
Variable Manufacturing Overheads(Machine hours *5.7)
$ 140,000.00
$ 190,000.00
Fixed manufacturing Overheads
$ 532,744.36
$ 467,255.64
Cost Of goods sold
$ 1,766,744.36
$ 1,607,255.64
$ 3,374,000.00
Total Cost of Goods sold
$ 3,374,000.00**
**Since there are no opening and closing inventory the cost of goods sold are equal to cost of goods manufactured.
Feel free to ask about any query regarding this question.
Part 1a)
Calculation of Predetermined Overhead Rate
Molding
Fabrication
(A)
Fixed Overheads
$ 710,000.00
$ 290,000.00
(B)
Machine Hours Total
28000
38000
(A/B)
Predetermined Overhead rate
$ 25.36
$ 7.63
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