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 29,000 Fabrication 39,000 250,000 $ Total 68,000 Machine-hours $ 1,010,000 Fixed manufacturing overhead costs $ 760,000 Variable manufacturing overhead per machine-hour $ 5.50 $ 5.50 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: Direct materials cost Direct labor cost Machine-hours Molding Fabrication Total $ 376,000 $ 329,000 $ 705,000 $ 250,000 $ 170,000 $ 420,000 22,000 7,000 29,000 Job C-200: Direct materials cost Direct labor cost Machine-hours Molding Fabrication Total $ 300,000 $ 230,000 $ 530,000 $ 170,000 $ 290,000 $ 460,000 7,000 32,000 39,000 Delph had no overapplied or underapplied manufacturing overhead during the year.

Answer 1

2-a) CALCULATION OF DEPARTMENTAL OVERHEAD RATE:

Departmental Overhead rate = Overheads of the department or cost centre / Corresponding base

Particulars	Molding Department	Fabrication Department
Estimated fixed manufacturing overheads	$760,000	$250,000
Estimated variable manufacturing overheads	$159,500 ( $5.50 * 29,000)	$214,500 ( $5.50 * 39,000)
Total estimated manufacturing overheads (A)	$919,500	$464,500
Machine hours (B)	29,000	39,000
Predetermined Overhead rate (A/B)	$31.71 per machine hour	$11.91

2-b) CALCULATION OF TOTAL MANUFACTURING COSTS:

Particulars	Job D-70	Job C-200
Direct Material cost (A)	705,000	530,000
Direct Labour cost (B)	420,000	460,000
Prime cost (A+B)	1,125,000	990,000
Manufacturing overheads	$780,990 ($31.71*22,000 + $11.91*7,000)	$603,090 ($31.71*7,000 + $11.91*32000)
Total manufacturing costs (Cost of Goods sold)	$1,905,990	$1,593,090

2-c) CALCULATION OF BIDDING PRICE:

Bidding price for JOB D-70: 120% of $1,905,990 = $2,287,188

Bidding price for JOB C-220: 120% of $1,593,090 = $1,911,708

2-d) CALCULATION OF COST OF GOODS SOLD:

Cost of goods sold for the year = Total manufacturing costs for Job D-70 + Total manufacturing costs for Job C-220

= $1,905,990 + $1,593,090

= $ 3,499,080