Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs
ID: 2330775 • 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
Answer:
1a
The estimated total manufacturing overhead cost is computed as follows:
Y = $950,000 + ($5.50 per MH)(72,000 MHs)
Estimated fixed manufacturing overhead
950,000
Estimated variable manufacturing overhead:
$5.500 per MH × 72,000 MHs
396000
Estimated total manufacturing overhead cost
1,346,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead
1,346,000
÷ Estimated total machine-hours (MHs)
72000
MHs
Predetermined overhead ratw
18.69
per MH
______________________________________________________
b & C
Total manufacturing cost assigned to Jobs D-70 and C-200:
D-70
C-200
Direct materials
700,000
520,000
Direct labor
390,000
430,000
Manufacturing overhead applied
($18.69 per MH × 31,000 MHs; )
579390
766290
Total manufacturing cost
1,669,390
1,716,290
1c. Bid prices for Jobs D-70 and C-200:
D-75
C-200
Total manufacturing cost
1,669,390
1,716,290
× Markup percentage (150%)
140%
140%
Bid price
2337146
2402806
__________________________________________________
D :
What is Delph’s cost of goods sold for the year?
Because the company has no beginning or ending inventories and only Jobs D-70 and C-200 were started, completed, and sold during the year, the cost of goods sold is equal to the sum of the manufacturing costs assigned to both jobs of $3,385,680 (=1669390+1716290)
Estimated fixed manufacturing overhead
950,000
Estimated variable manufacturing overhead:
$5.500 per MH × 72,000 MHs
396000
Estimated total manufacturing overhead cost
1,346,000
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