Question

Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]

[The following information applies to the questions displayed below.]

Delph 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		30,000		40,000		70,000
Fixed manufacturing overhead costs	$	760,000	$	210,000	$	970,000
Variable manufacturing overhead cost per machine-hour	$	5.30	$	5.30

  

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	$	376,000	$	330,000	$	706,000
Direct labor cost	$	210,000	$	160,000	$	370,000
Machine-hours		24,000		6,000		30,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	250,000	$	260,000	$	510,000
Direct labor cost	$	180,000	$	250,000	$	430,000
Machine-hours		6,000		34,000		40,000

Delph had no underapplied or overapplied manufacturing overhead during the year.

Exercise 2-15 Part 1

Required:

1. Assume Delph 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 Delph establishes bid prices that are 150% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200?

d. What is Delph’s cost of goods sold for the year?

Answer 1

a. Fixed manufacturing pre determined overhead rate = Fixed manufacturing overhead costs / Machine-hours

= 970,000 / 70,000

= 13.85

plantwide predetermined overhead rate = 13.85+ 5.3 = 19.16 ( rounded to two decimal places)

b.

	D70	C 200
Direct materials cost	706000	510000
Direct labor cost	370000	430000
Manufacturing overhead	574800	766400
	[30000*19.16]	[40000*19.16]
Total manufacturing costs	1650800	1706400

c.

	D70	C 200
Total manufacturing costs	1650800	1706400
Mark up (150%)	2476200	2559600
Bid Price	4127000	4266000

d.

Cost of goods sold = 1650800+1706400 = 3357200