\"Blast it!\" said David Wilson, president of Teledex Company. \"We\'ve just los
ID: 2445749 • 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 Department Fabricating Machining AssemblyTotal Plant $219,000 $109,500 $328,500 $ 657,000 Manufacturing overhead $383,250 $438,000 $ 98,550 $ 919,800 Direct labor 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: Department Direct materials Direct labor Manufacturing overhead labricating Machining /exKYnily .10.1 Mart $ 4,900 400 3,300 $ 8,600 $ 6,600 $ 700 8,100 $ 15,400Explanation / Answer
Answer:
4.
a) Company’s bid price on the Koopers Job if a plantwide overhead rate had been used to apply overhead cost
Company’s bid price = 150% of total manufacturing cost
Total Manufacturing Cost = Direct materials + Direct labor + manufacturing overhead = $8,600 + $15,400 + $21,560 = $45,560
Company’s bid price = 150% x $45,560 = $68,340
b) Company’s bid price if departmental overhead rates had been used to apply overhead cost
Manufacturing Overhead Cost if departmental overhead rates had been applied = $16,780
Total Manufacturing Cost = Direct materials + Direct labor + manufacturing overhead
Total Manufacturing Cost = $8,600 + $15,400 + $16,780 = $40,780
Company’s bid price = 150% of total manufacturing cost = $40,780 x 150% = $61,170
5.
We can analyze Under/Over applied Overhead Costs by comparing Budgeted Cost and Actual Cost.
Under-Applied Overhead Cost arises when Budgeted Overhead Costs are greater than Actual Overhead Costs
Over-applied Overhead Cost arises when Budgeted Overhead Costs are lower than Actual Overhead Costs
a) Computation of underapplied or overapplied overhead for the year (assuming that planwide overhead rate is used)
Total Budgeted Manufacturing Overheads = $919,800
Total Actual Manufacturing Overheads = $964,800
Over-Applied Manufacturing Overheads = Budgeted Overhead – Actual Overhead = $919,800 - $964,800 = $45,000
b) Computation of underapplied or overapplied overhead for the year (assuming that departmental overhead rate is used)
Fabricating
Over-applied Overhead Cost
$11,750
Machining
Over-applied Overhead Cost
$45,000
Assembly
Under-applied Overhead Cost
($11,750)
Total Plant
Over-applied Overhead Cost
$45,000
Working:
Calculation of Budgeted and Actual Overhead Costs
Budgeted Overhead Cost
Actual Overhead Cost
Difference (Budgeted – Actual)
Situation (Under/Over Applied)
Fabricating
$219,000 x 175% = $383,250
$395,000
$11,750
Over-Applied
Machining
$109,500 x 400% = $438,000
$483,000
$45,000
Over-Applied
Assembly
$328,500 x 30% = $98,550
$86,800
$11,750
Under-Applied
Total Plant
$919,800
$964,800
$45,000
Over-Applied
Fabricating
Over-applied Overhead Cost
$11,750
Machining
Over-applied Overhead Cost
$45,000
Assembly
Under-applied Overhead Cost
($11,750)
Total Plant
Over-applied Overhead Cost
$45,000
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