Don\'t tell me we\'ve lost another bid exclaimed Sandy Kovallas, president of Le

Question

Don't tell me we've lost another bid exclaimed Sandy Kovallas, president of Lenko Products, Inc. I'm afraid so,"replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $9,800 on the Hastings job. 1 just can't figure it out said Kovallas. lt seems we're either too high to get the job or too low to make any money on half the jobs we bid anymore. What's happened? Lenko Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labor cost The following estimates were made at the beginning of the year. Total Plant S300,000 $215,000 $386,000 901,000 Manufacturing overhead 538,000 $846,640 93,000 $ 1,477,640 Cutting Assembly Direct labor Jobs require varying amounts of work in the three departments. The Hastings job, for example would have required manufacturing costs in the three departments as follows Department Direct materials Direct labor Manufacturing overhead Cutting Machining Assembly Total plant $ 11,900 $ 900 S 5,600 S18,400 $ 6,500 $ 1,800 $13,000 S 21,300 The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs Required: 1.Assuming the use of a plantwide overhead rate a.Compute the rate for the current year. (Round your answer to the nearest whole percent.) Predetermined overhead rate 164 % of direct labor cost b.Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. (Round "Departmental or Plantwide predetermined overhead rate" to the nearest

Explanation / Answer

2a)

Cutting

179%

Machining

394%

Assembly

24%

2b)

$21,847

4a)

Bid price = (18,400 + 21,300 + 34,932) 150%   = $111,948

4b) (18,400 + 21,300 +21,847 ) 150% = $92,321

5A)

Actual – applied = 1,483,000 – 1,477,640   = 5360 underapplied

b)

Applied

Actual

Under(overapplied)

Cutting

537,000

560,000

23,000

Machining

847,100

830,000

(17,100)

Assembly

22,320

   93,000

70,680

total

76,580 under applied

Cutting

179%

Machining

394%

Assembly

24%

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