Question

4. Explain why the manufacturing overhead was unlucru EXERCISE 3-18 Plantwide and Departmental Overhead Rates; Job Costs [L01, LO2, L031 Smithson Camnany measiah arder casting system and has two manufacturing departments Molding and Fabrication. The company provided the following estimates at the beginnine the year: Molding Fabrication Total 20.000 $800,000 $5.00 Machine-hours ....... Fixed manufacturing overhead costs ............... Variable manufacturing overhead per machine-hour ..... 30.000 $300,000 $5.00 50.000 $1,100,000 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: Total Job D-75: Molding Fabrication $375,000 $325,000 $200,000 $160,000 15,000 5,000 Direct materials cost . . . . . . . Direct labor cost ....... Machine-hours . . . . . . . . . $700,000 $360,000 20,000 Molding Fabrication Total Job C-100: Direct materials cost ........ Direct labor cost ...... Machine-hours . . . . . . . $300,000 $175,000 5,000 $250,000 $225,000 25,000 $550,000 $400,000 30,000 Smithson had no overapplied or underapplied manufacturing overhead during the year. Required: 1. Assume Smithson uses a plantwide overhead rate based on machine-hours. a. Compute the predetermined plantwide overhead rate. b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100. c. If Smithson establishes bid prices that are 150% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100? d. What is Smithson's cost of goods sold for the year?

Answer 1

Solution  a:

Plantwide predetermined overhead rate = Estimated overhead / Estimated machine hours = [(20000*$5) + (30000*$5) + $1,100,000] / 50000

= $27 per machine hour

Solution b:

Compuatation of manufacturing cost assigned to Job - Smithson
Particulars	Job D75	Job C100
Direct Material	$700,000.00	$550,000.00
Direct Labor	$360,000.00	$400,000.00
Manufacturing overhead D 75 - 20000*$27 C100 - 30000*$27	$540,000.00	$810,000.00
Total Manufacturing cost	$1,600,000.00	$1,760,000.00

Solution c:

Computation of Bid Price
Particulars	Job D75	Job C100
Manufacturing Cost	$1,600,000.00	$1,760,000.00
Markup (50%)	$800,000.00	$880,000.00
Bid Price of Job	$2,400,000.00	$2,640,000.00

Solution d:

Cost of goods sold for the year = $1,600,000 + $1,760,000 = $3,360,000