Question

Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," repl he operations vice president. "One of our competitors underbid us by about $10,000 on the Hastings job." "I just can aid Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. Wh Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginnin, Department Direct labour Manufacturing overhead Cutting $ 304,500 $548,100 Machining $ 203,200 $ 812,600 Assembly $ 406,089 $ 101,500 Total Plant $ 913,500 $1,461,600 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required mar costs in the three departments as follows: Department Machining Assembly $ 1,200 $ 6,200 $ 2,300 $14,800 Cutting $ 14,400 $ 8,000 Direct material Direct labour Manufacturing overhead Total Plant $ 21,800 $ 25,100 The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. Required: 1. Assuming the use of a plantwide overhead rate: a. Compute the rate for the current year. < Prey 7 of 7 !!! Next

Answer 1

1-a) Predetermined overhead rate= Estimated total manufacturing overhead/Estimated total direct labor cost

= $1461600/913500= 160% of direct labor cost

b) Manufacturing overhead cost= Total direct labor cost*Predetermined overhead rate

= $25100*160%

= $40160

2-a) Predetermined overhead rate= Estimated manufacturing overhead/Estimated direct labor cost

Cutting= $548100/304500= 180% of direct labor cost

Machining= $812000/203000= 400% of direct labor cost

Assembly= $101500/406000= 25% of direct labor cost

b) Manufacturing overhead cost= Cutting+Machining+Assembly

= ($8000*180%)+($2300*400%)+($14800*25%)

= $27300

4-a) Total manufacturing cost= Direct materials+Direct labor+Overhead applied

= $21800+25100+40160= $87060

Bid price= Total manufacturing cost*150%

= $87060*150%

= $130590

b) Total manufacturing cost= Direct materials+Direct labor+Overhead applied

= $21800+25100+27300= $74200

Bid price= Total manufacturing cost*150%

= $74200*150%

= $111300

5) Applied manufacturing overhead= $885300*160%= $1416480

Underapplied or averapplied overhead= Applied manufacturing overhead-Actual manufacturing overhead

= $1416480-1511600

= $95120 underapplied

b) Underapplied or averapplied overhead= Applied manufacturing overhead-Actual manufacturing overhead

Cutting= ($326000*180%)-570500

= $16300 overapplied

Machining= ($214500*400%)-847800

= $10200 overapplied

Assembly= ($344800*25%)-93300

= $7100 underapplied

Cutting	Overapplied overhead cost	$16300
Machining	Overapplied overhead cost	$10200
Assembly	Underapplied overhead cost	$7100
Total plant	Overapplied overhead cost	$19400