Question

Upton and Verlander Company uses a job-order costing system. Upton and Verlander has two manufacturing departments—Molding and Fabrication. Upton and Verlander 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	$	790,000	$	240,000	$	1,030,000
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	$	327,000	$	703,000
Direct labor cost	$	220,000	$	140,000	$	360,000
Machine-hours		23,000		7,000		30,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	200,000	$	280,000	$	480,000
Direct labor cost	$	140,000	$	240,000	$	380,000
Machine-hours		7,000		33,000		40,000

Upton and Verlander had no underapplied or overapplied manufacturing overhead during the year.

Required:

1. Assume Upton and Verlander 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 Upton and Verlander establishes bid prices that are 140% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200?

d. What is Upton and Verlander’s cost of goods sold for the year?

Answer 1

1a
Estimated Variable manufacturing overhead	371000	=(30000*5.3)+(40000*5.3)
Estimated Fixed manufacturing overhead	1030000
Total Estimated manufacturing overhead	1401000
Divide by Estimated Machine hours	70000
Predetermined overhead rate	20.01	per MH
1b
	Job D-70	Job C-200
Direct materials cost	703000	480000
Direct labor cost	360000	380000
Overhead applied	600300	800400
Total manufacturing cost	1663300	1660400
1c
	Job D-70	Job C-200
Total manufacturing cost	1663300	1660400
Add: Markup @40%	665320	664160
Bid prices	2328620	2324560
1d
Total manufacturing cost Job D-70	1663300
Total manufacturing cost Job C-200	1660400
Cost of goods sold	3323700
Workings:
	Job D-70	Job C-200
Overhead applied	=30000*20.01	=40000*20.01