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 operates a job order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labor cost. The following estimates were made at the beginning of the year: Department Direct labor Manufacturing overhead Fabricating $ 201,000 $ 351,750 Machining $ 100,500 $ 402,000 Assembly $ 301,500 $ 90,450 Total Plant $ 603,000 $ 844,200 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 Direct materials Direct labor Manufacturing overhead Fabricating Machining Assembly Total Plant $ 3,100 $ 300 $ 1,500 $ 4,900 $ 3,000 $ 600 $ 6,300 $ 9,900 ?

Answer 1

	Fabricating	Machining	Assembly	Total Plant
Direct Labor	201000	100500	301500	603000
Manufacturing Overhead	351750	402000	90450	844200
Overhead Rate	175%	400%	30%	140%
Bid Price
	Fabricating	Machining	Assembly	Total Plant
Direct Material	3100	300	1500	4900
Direct Labor	3000	600	6300	9900
Manufacturing overhead	5250	2400	1890	9540
Total cost	11350	3300	9690	24340
Bid Price	24,340
a.Platwide predetermined rate	140%	of Direct labor cost
Overhead applied	816,200
Actual Overhead	867,000
Underapplied	50,800
	Overhead applied	Actual Overhead	Difference
Fabricating	369,250	361,000	(8,250)	Overapplied
Machining	436,000	421,000	(15,000)	Overapplied
Assembly	78,900	85,000	6,100	Under applied
Total Plant	884,150	867,000	(17,150)	Overapplied