Question

"Blast it!" said 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 fixed) to jobs. The following estimates were made at the beginning of the year: Department Machining $ 426,000 $ 106,500 Fabricating $ 372,750 $ 213,000 Manufacturing overhead Direct labor Assembly $ 95,850 $ 319,500 Total Plant $ 894,600 $ 639,000 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: Department Machining $ 300 $ 600 Fabricating $ 4,300 $5,400 Direct materials Direct labor Manufacturing overhead Assembly $ 2,700 $ 7,500 Total Plant $ 7,300 $13,500

Answer 1

Predetermined Overhead Rate = Estimated overheads/estimated direct labor cost	140.00%
Applied on Koopers Job	18,900
	Fabricating	Machining	Assembly
Manufacturing Overhead	372,750	426,000	95,850
Direct Labor	213,000	106,500	319,500
Predetermined Rate	175%	400%	30%
b. Applied to Koopers Job	14,100
	Plantwide Rate	Departmental Rates
Direct Material	7,300	7,300
Direct Labor	13,500	13,500
Overheads	18,900	14,100
Total cost	39,700	34,900
Bid Price	59,550	52,350

C D 1 Predetermined Overhead Rate=894600/639000 2 Applied on Koopers Job 1=13500*B1 0 + Fabricating 372750 213000 =B5/B6 Machining 426000 106500 =C5/C6 Assembly 95850 319500 =D5/D6 =5400*B7+600*C7+7500*D7 5 Manufacturing Overhead 6 Direct Labor 7 Predetermined Rate 8 9 b. Applied to Koopers Job 10 11 12 Direct Material 13 Direct Labor 14 Overheads 15 Total cost 16 Bid Price Plantwide Rate 7300 13500 =B2 =SUM(B12:B14) =B15*150% Departmental Rates 7300 13500 =B9 =SUM(C12:C14) C15*150%