Question

All one problem, 6 parts. THANK YOU!!

"Blast it!" said David Wilson, president of Teledex Company, "We've just lost the bid on the Koopers job by $4,000. 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 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. Manufacturing overhead Direct labor Department Fabricating Machining Assembly Total Plant $ 378,000 $ 432,000 $ 97,200 $ 907,200 $ 216,000 $ 108,000 $324,000 $ 648,000 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 $ 4,600 $ 6,000 Direct materials Direct labor Manufacturing overhead Department Machining $ 200 $ 500 ? Assembly $ 3.000 $ 7,800 Total Plant $ 7,800 $14,300 ? 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.

Answer 1

Requirement 1 A

Plantwide Predetermined Overhead Rate for Current Year = Total Estimated Overhead Cost / Total Direct Labour Cost * 100

Plantwide Predetermined Overhead Rate = 907,200 / 648,000 * 100

Plantwide Predetermined Overhead Rate = 140% of Direct Labour Cost

Requirement 1 B

Manufacturing Overhead Applied to Koopers Jobs = Direct Labour Cost for Koopers Job * 140% of Direct Labour Cost for Koopers Job

Manufacturing Overhead applied to Koopers Job = 14,300 * 140%

Manufacturing Overhead applied to Koopers Job = $ 20,020.

Requirement 2A

Plantwide Predetermined Overhead Rate for Each Department = Total Estimated Overhead Cost for Each Department / Total Direct Labour Cost for Each Department * 100

For Fabricating Department

Using the Above formula

Predetermined Overhead Rate for Fabricating Department = 378,000 / 216,000 * 100

Predetermined Overhead Rate for Fabricating Department = 175% of Direct Labour Cost of Fabricating Department

For Machining Department

Using the above Formula

Predetermined Overhead Rate for Machining Department = 432,000 / 108,000 * 100

Predetermined Overhead Rate for Machining Department = 400% of Direct Labour Cost of Machining Department

For Assembly Department

By using the above Formula

Predetermined Overhead Rate for Assembly Department = 97,200 / 324,000 * 100

Predetermined Overhead Rate for Assembly Department = 30% of Direct Labour Cost for Assembly Department

Requirement 2 B

Particulars	Fabricating Department	Machining Department	Assembly Department
Direct Labour Cost	6,000	500	7,800
Department Overhead Rate	175%	400%	30%
Total Manufacturing Applied to Koopers Job	10,500	2,000	2,340

Total Manufacturing Overheads Cost as per Department Overhead Rate for Koopers Jobs = 10,500 + 2,000 + 2,340 = $ 14,840

Requirement 4 A

Calculation of Kooper Job using Plantwide Predetermined Overhead Rate

Particulars	Amount
Direct Materials	7,800
Direct Labour	14,300
Manufacturing Overhead Cost	20,020
Total Manufacturing Costs	42,120
Bid Price (150% * Total Manufacturing Costs)	63,180

Requirement 4B

Calculation of Bid Price for Koopers Job using Department Overhead Rate

Particulars	Amount
Direct Materials	7,800
Direct Labour	14,300
Manufacturing Overhead Cost.	14,840
Total Manufacturing Costs	36,940

Bid Price (150% * Total Manufacturing Costs)

55,410