Question

Blast it" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $2,000. It seems were 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 uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year Department Fabricating Machining Assembly Total Plant $364,000 $ 416,000 $ 93,600 $ 873,600 $ 200,000 $ 104,000 $312,000 $ 624,000 Manufacturing overhead Direct labor 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: Fabricating $ 3,800 $ 4,400 Department Machining $400 $ 700 Assembly $ 2,200 $7.000 Direct materials Direct labor Manufacturing overhead Total Plant $ 6,400 $12,100 ? Required: 1. Using the company's plantwide approach: a. Compute the plantwide predetermined rate for the current year b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

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Solution Date 1a) Calculation of plant wide overrate overhead rate Plant wide overhead rate - Estimated manufacturing overhead / Direct Labour Cost = $873,600 /624,000 140% dicct Labow Cost Thus, Plantwide overhead rate is 140% direct labour cost. ef Ib) Calculation coef amount overhead cost that would be applied of manufacturing to koopers job. Manufacturing overhead – Faibricating overhead + Machining overhead + Assembly owerhead. = $6,160 + $980+$ 9,800 $ 16,940 Working Notca 4,400*140% = 6,160 980 7000* 140% = 9,800 te 700 * 140 % 2) 32 Scanned by TapScanner

Date as 20) Calculation of puedetermined oveshead Mate for Fabrication department using the direct Labor allocation base Overificad sate - Estimated overbead cost for fabrication Llabour Last of fabrication =) $364,000 / 208,000 = 175 % cyf direct labour cost . Overhead rate s Estimated overhead coast for machining / Labour cost of og machining t = $16, 600 / lo9, 000 = 400% of direct Labows Cost. Overhead rate - Estimated overhead cost for asembly / Labour cost of assembly -$ 93,600 $312,000 30% of direct Labour cost, Predetermined evenbeed Rate Fabricating Department Machining Department Assemblyo Depurtment - 175% 400 % 30% Scanned by TapScanner

Date 2b) Calculation of amount of manufacturing overhead cost that would be applied to koopers job based on departmental manufacturing Mate Manufacturing oueshead - Fabricating overhead + Machining Overhead & Assembly Overheast $ 7,650 +$ 2800+$ 2,100 $ 12,550 Wazbing Notes u 4,400*174% = 7,650 21 400*400% 3) 7000*30% = 2100 2,800 . Scanned by TapScanner