\"Blast it!\" said David Wilson, president of Teledex Company. \"We\'ve just los
ID: 2346466 • Letter: #
Question
"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $9,900. It seems we're either too high to get the job or too low to make any money on half the jobs we bid."
Assuming the use of a plantwide overhead rate:
1.Compute the rate for the current year.
2.Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:
Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead).
5.What was the company's bid price on the Koopers job
6.What would the bid price have been if departmental overhead rates had been used to apply overhead cost?
"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $9,900. It seems we're either too high to get the job or too low to make any money on half the jobs we bid."
Explanation / Answer
1.Compute the rate for the current year. 1,443,010/901,000 = $1.60
2.Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
21,100*1.60 = $33,760
Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:
3. rates:
a. fabricating: 537,000/300,000 = 1.79
b. Machining: 806,010/201,000 = 4.01
c. assembly: 100,000/400,000 = 0.25
4. applied:1.79*6500 + 4.01*1700 + 0.25*12900 = $21,677
Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead).
5.What was the company's bid price on the Koopers job
1.5*(18,200 + 21,100 + 33,760) = $109,590
6.What would the bid price have been if departmental overhead rates had been used to apply overhead cost?
1.5*(18,200 + 21,100 + 21,677) = $91,465.50
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