Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs
ID: 2330518 • Letter: E
Question
Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]
[The following information applies to the questions displayed below.]
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:
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:
Delph had no underapplied or overapplied manufacturing overhead during the year.
Exercise 2-15 Part 1
Required:
1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.
c. If Delph 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 Delph’s cost of goods sold for the year?
Molding Fabrication Total Machine-hours 31,000 41,000 72,000 Fixed manufacturing overhead costs $ 740,000 $ 210,000 $ 950,000 Variable manufacturing overhead cost per machine-hour $ 5.50 $ 5.50Explanation / Answer
1) computation of predetermined overhead rate based on machine hours Predetermine overhead rate = Estimated total manufacturing overhead cost/estimated total amount of the allocation base Calculation of Manufacturing overhead cost Manufacturing oh cost = estimated total fixed manufacturing cost+estimated variable cost permachine hour for molding* machine hour for molding required to support estimated production +estimated variable manufacturing oh cost machine hour for facbrication * machine hour for fabrication required to support estimated production total manufacturing overhead cost = 950000+(5.50*31000)+(5.50*41000) total manufacturing overhead cost = 1346000 Computation of predetermine overhead rate Predetermine overhead rate = Estimated total manufacturing overhead cost/estimated total amount of the allocation base Predetermine overhead rate = 1346000/72000 = 18.69 the plantwide predetermine overhead rate is $ 18.69 per machine hour C) Calculation of Bid price of job D-70 first of all we have to calculate total manufacturing cost of job D-70 particulars Molding Fabrication total Dierct material 378000 322000 700000 Direct labour 230000 160000 390000 overheads 448560 130830 579390 ( machine hrs* predetermined rate) (24000*18.69) (7000*18.69) total manufacturing cost 1056560 612830 1669390 total manufacturing cost for job D-70= 1669390 Total manufacturing cost to job C-200 particulars Molding Fabrication total Dierct material 290000 230000 520000 Direct labour 160000 270000 430000 overheads 130830 635460 766290 ( machine hrs* predetermined rate) (7000*18.69) (34000*18.69) total manufacturing cost 580830 1135460 1716290 total manufacturing cost for job C-200 = 1716290 Bid Price of Job D-70 Total manufacturing cost = 1669390 Bid Price of Job D-70 = (140% * total manufacturing cost) Bid Price of Job D-70= 2337146 Bid Price of Job C-200 Total manufacturing cost = 1716290 Bid Price of Job C-200 = (140% * total manufacturing cost) Bid Price of Job C-200= 2402806 D) Cost of goods Sold = opening /beginning inventory +purchases- closing inventory in the given question co has no opening and closing inventory when job started completed and production is sold during the year hence the cost of goods sold during the year will be Cost of goods Sold = manufacturing cost of joB D-70+Manufacturing cost of job C-200 Cost of goods sold = $1669390+$1716290 Cost of goods sold = $3385680
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