\"Blast it!\" sald David Wilson, president of Teledex Company. \"We\'ve just los

Question

"Blast it!" sald David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers Job by $3,000. It seems we're elther 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 uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply Its manufacturing overhead (assumed to be all fixed) to Jobs. The following estimates were made at the beginning of the year: Department Fabricating Machining Assembly Total Plant $ 371,000 424,000 95,400 890,400 $ 212,000 106,000 318, 000 636, 000 Manufacturing overhea 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 FabricatingMachining Direct materials Direct labor Manufacturing overhead Assembly $2,600 $7,400 Total Plant $7,300 $13,400 $,200 $5,200 500 800 Required: 1. Using the company's plantwide approach: a. Compute the plantwide predetermined rate for the current year b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. 2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions: a.Compute the predetermined overhead rate for each department for the current year b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. 4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). a.What was the company's bld price on the Koopers job using a plantwide predetermined overhead rate? b What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost? Complete this question by entering your answers in the tabs below Required 1A Required IBRequired 2A quired 2BRequired 4ARequired 4B Using the company's plant wide approach. Compute the plant wide predetermined rate for the current year. overhead rate % of direct labor cost

Explanation / Answer

1.a. Plantwide predetermined overhead rate = Total estimated manufacturing overhead / Total estimated direct labor cost = $890400 / $636000 = 140% of direct labor cost

1.b. Manufacturing overhead cost applied to Koopers job = 140% x $13400 = $18760

2.a. Department Fabricating Machining Assembly Manufacturing overhead $ 371000 424000 95400 Direct labor $ 212000 106000 318000 Predetermined overhead rate % 175% 400% 30% ($371000/$212000) ($424000/$106000) ($95400/$318000) 2.b. Koopers Job Department Fabricating Machining Assembly Total Direct materials $ 4200 500 2600 7300 Direct labor $ 5200 800 7400 13400 Manufacturing overhead $ 9100 3200 2220 14520 (175% x $5200) (400% x $800) (30% x $7400)

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