Question

A Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:

  

	Molding		Fabrication			Total
Machine-hours		23,000		33,000		56,000
Fixed manufacturing overhead costs	$	730,000	$	200,000	$	930,000
Variable manufacturing overhead cost per machine-hour	$	5.50	$	5.50

  

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:

  

Job D-70:	Molding		Fabrication		Total
Direct materials cost	$	374,000	$	330,000	$	704,000
Direct labor cost	$	210,000	$	130,000	$	340,000
Machine-hours		17,000		6,000		23,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	280,000	$	280,000	$	560,000
Direct labor cost	$	180,000	$	280,000	$	460,000
Machine-hours		6,000		27,000		33,000

The company had no underapplied or overapplied manufacturing overhead during the year.

Required:

1. Assume the compant uses a plantwide predetermined overhead rate based on machine-hours.

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

c. If the company establishes bid prices that are 140% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200?

d. What is the companies cost of goods sold for the year?

Answer 1

Answer :-

Assume the compant uses a plantwide predetermined overhead rate based on machine-hours.

1-a. Total Overhead of Molding = Fixed Manufacturing Overhead Cost of Molding + ( Variable manufacturing overhead cost per machine-hours × Machine-hours)

Fixed Manufacturing Overhead Cost of Molding = $730,000

Variable manufacturing overhead cost per machine-hour = $5.50

Machine-hours = 23,000 hours

Total Overhead of Molding = $730,000 + ( $5.50 × 23,000)

Total Overhead of Molding = $856,500

Total Overhead of Fabrication = Fixed Manufacturing Overhead Cost of Fabrication + ( Variable manufacturing overhead cost per machine-hours × Machine-hours)

Fixed Manufacturing Overhead Cost of Fabrication = $200,000

Variable manufacturing overhead cost per machine-hour = $5.50

Machine-hours = 33,000 hours

Total Overhead of Fabrication = $200,000 + ( $5.50 × 33,000)

Total Overhead of Fabrication = $381,500

Total overhead = Total Overhead of Molding + Total Overhead of Fabrication

Total Overhead = $856,500 + $381,500

Total Overhead = $1,238,000

Plantwide Predetermined overhead rate = Total Overhead / Total machine-hours

Total Machine-hours = 56,000 hours

Predetermined Overhead rate = $1,238,000 / 56,000

Predetermined Overhead rate = $22.11 per machine-hour.

1-b.

	Job D-70	Job C-200
Direct Materials	$704,000	$560,000
Direct Labor	$340,000	$460,000
Manufacturing Overhead(Total machine-hours × Predetermined overhead rate)	$508,530 (23,000 x 22.11)	$729,630 (33,000 x 22.11)
Total Manufacturing Costs	$1,552,530	$1,749,630

1-c.

Bid price of Job D-70 = Total Manufacturing Cost of Job D-70 × 140%

Bid price of Job D-70 = $1,552,530 x 140%

Bid price of Job D-70 = $2,173,542

Bid price of Job C-200 = Total Manufacturing Cost of Job C-200 × 140%

Bid price of Job C-200 = 1,749,630 x 140%

Bid price of Job C-200 = $2,449,482

1-d. Cost of Goods Sold = Total Manufacturing costs of Job D-70 and Job C-200

Cost of good sold = $1,552,530 + $1,749,630

Cost of Good sold = $3,302,160