Question

"Blast it" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $4,000. It seems we're elther 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 flixed) to jobs. The following estimates were made at the beginning of the year De Manufacturing overhead Direct labor Fabricating Machining Assembly Total Plant $ 374,500 428,000 $96,300 $ 898,800 214,000 107,000 $ 321,000 642,000 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: Fabricating Machining Assembly Total Plant Direct paterials Direct labor Manufacturing overhead $4,400 $5, 600 $ 400 各700 $2,800 $7,600 $ 7,600 $13,900 Required 1. Using the company's plantwide approach: a. Compute the plantwide predetermined rate for the current year b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. 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 b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. 4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). a What was the company's bid price on the Koopers job using a plantwide predetermined overhead rate? b What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost? Complete this question by entering your answers in the tabs below. Required 1A Required 18 Required 2A Required 28 Required 4A Required 4B Using the company's plantwide approach, compute the plantwide predetermined rate for the current year overhead rate of direact labor oost

Answer 1

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Requirement 1A:
Predetermined Overhead Rate:
Estimated Direct Labor Cost	A	$                       642,000
Estimated Manufacturing Overhead	B	$                       898,800
Predetermined Overhead Rate	B/A	140.00%
Requirement 1B:
Manufacturing Overhead Cost applied to Job:
Direct Labor cost for Job		$                         13,900
Predetermined Overhead Rate		140%
Manufacturing Overhead Cost applied to Job	13900*140%	$                         19,460
Requirement 2A:
	Direct Labor	Manu Overhead	Predetermined MOHR
Fabricating	$      214,000	$                       374,500	175.00%
Machining	$      107,000	$                       428,000	400.00%
Assembly	$      321,000	$                         96,300	30.00%
Requirement 2B:
Manufacturing Overhead Cost applied to Job
	Direct Labor	Predetermined MOHR	Overhead Applied
Fabricating	$           5,600	175.00%	$                          9,800
Machining	$              700	400.00%	$                          2,800
Assembly	$           7,600	30.00%	$                          2,280
Manufacturing Overhead Cost applied to Job			$                        14,880
Requirement 4a:
Direct Material	$           7,600
Direct Labor	$        13,900
Manufacturing Overhead	$        19,460
Total Manufacturing Cost	$        40,960
Bid Price 150%	$        61,440
Requirement 4b:
Direct Material	$           7,600
Direct Labor	$        13,900
Manufacturing Overhead	$        14,880
Total Manufacturing Cost	$        36,380
Bid Price 150%	$        54,570