Question

Bullding Your Skills Analytical Thinking 2-22 Plantwide versus Departmental Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3, LO2-4) "Blast er sald David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $3,000. 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 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 foed) to Jobs. The following estimates were made at the beginning of the year. - ent Fabricating MachiningAssembly 376,25 Departement Total Plant Total Plant s ses. Manufacturing overhead 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: costs in the three departments as follows me departmane me kopen Total Plant $ 7,980 Direct materials Direct labor Manufacturing overhea Required: 1 Using the company's plantwide approach: 3. Compute the plantwice predetermined rate for the current year. b. Determine the amount of manufacturing overhead cost that would have been appiled to the Koopers job. .compute tre piantwoce predetermine rate for tne current years 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 D. Determine the amount of manufacturing overhead cost that would have been app led to the Koopers job. 4. Assume that it is customary in the Industry to Old jobs at 150% of tota manufacturing cost orect materiais direct labor and app overhead 3. What was the company's odorce on the Koopers using a patce predetermined overhead rate? D. What would the bid price have been it departmental predetermined overned rates had been used to apply overesd cost? Complete this question by entering your answers in the tabs below

Answer 1

1)
a)	Total Manufacturing OH			$    903,000.00		b)	Kooper's Job
	Total Direct Labor			$    645,000.00			Direct Labor		$ 14,300.00
	Predetermined OH rate			140%			Rate		140%
							OH applied		$ 20,020.00

2)

				Manu. OH	Direct Labor	Rate
a)	Fabricating Department			$ 376,250.00	$ 215,000.00	175%
	Machining Department			$ 430,000.00	$ 107,500.00	400%
	Assembly Department			$   96,750.00	$ 322,500.00	30%

b)	Kooper's Job
			Direct Labor	Rate	Applied OH
	Fabricating Department		$   5,800.00	175%	$ 10,150.00
	Machining Department		$      800.00	400%	$   3,200.00
	Assembly Department		$   7,700.00	30%	$   2,310.00
					$ 15,660.00

4)

a)

Direct Material		$     7,900.00
Direct Labor		$   14,300.00
Applied OH		$   20,020.00
Total Manu. Cost		$   42,220.00
Bid Price	($ 42220 x 150%)	$   63,330.00

b)
		Material	Labor	OH	Total
Fabricating Department		$   4,500.00	$   5,800.00	$         10,150.00	$   20,450.00
Machining Department		$      500.00	$      800.00	$           3,200.00	$     4,500.00
Assembly Department		$   2,900.00	$   7,700.00	$           2,310.00	$   12,910.00
					$   37,860.00
			Bid Price	($ 37860 x 150%)	$   56,790.00