Question

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		20,000		30,000	50,000
Fixed manufacturing overhead costs	$	700,000	$	210,000	$ 910,000
Variable manufacturing overhead cost per machine-hour	$	3.00	$	1.00

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	$	375,000	$	325,000	$	700,000
Direct labor cost	$	200,000	$	160,000	$	360,000
Machine-hours		14,000		6,000		20,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	300,000	$	250,000	$	550,000
Direct labor cost	$	175,000	$	225,000	$	400,000
Machine-hours		6,000		24,000		30,000

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

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

Answers

• Requirement 1

[a]

Working		Molding Department:	Fabrication Department:	Total
A	Variable Overhead rate	$                3.00	$                        1.00
B	Total machine hours	20,000	30,000	50,000
C = A x B	Total Variable Overhead	$           60,000	$                   30,000	$                90,000
D	Total Fixed Overheads	$         700,000	$                 210,000	$             910,000
E = C+D	Total manufacturing Overhead			$          1,000,000
F	Total machine hours			50,000
G = E/F	Plant Wide Overhead rate			$                  20.00

[b]

	Job D 70	Job C 200
Molding Department:
Direct material cost	$         375,000	$                 300,000
Direct Labor cost	$         200,000	$                 175,000
Manufacturing Overhead	$         280,000	$                 120,000
Fabrication Department:
Direct material cost	$         325,000	$                 250,000
Direct Labor cost	$         160,000	$                 225,000
Manufacturing Overhead	$         120,000	$                 480,000
Total manufacturing cost assigned	$     1,460,000	$             1,550,000

• Requirement [c]

		Job D 70	Job C 200
A	Total manufacturing cost assigned	$                              1,460,000	$     1,550,000
B = A x 150%	Bid Price	$                              2,190,000	$     2,325,000

• Requirement [d]

Cost of Goods Sold = $ 1460000 + 1550000
= $ 3,010,000