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

Question

"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $2,000. 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 following estimates were made at the beginning of the year: Department Fabricating Machining Assembly $208,000 $104,000 312,000 $ 624,000 $ 364,000 $416,000 $ 93,600 $ 873,600 Total Plant Direct labor Manufacturing overhead 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 Departmert Direct materials Direct labor Manufacturing overhead Fabricating Machining Assembly Total Plant $ 3,800 400 2,200 $ 6,400 $ 4,400 $ 700 $7,000 $ 12,100 The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs Required: 1. Assuming use of a plantwide overhead rate a. Compute the rate for the current year Predetermined overhead rate % of direct labor cost b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job Manufacturing overhead cost

Explanation / Answer

a) Plant wide overhead rate = Estimated overhead*100/estimated labour cost

= 873600*100/624000

Plant wide overhead rate = 140% of direct labour cost

b) Applied overhead :

Manufacturing overhead cost = 16940

Fabricating Machining Assembly Total Direct labour cost 4400 700 7000 12100 Manufacturing overhead applied 6160 980 9800 16940

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