\"Blast it!\" said David Wilson, president of Teledex Company. \"We\'ve just los

Question

"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $2,000. 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: Department Fabricating Machining Assembly Total Plant $ 353,5e0 $ Manufacturing overhead Direct labor 90,900 $ 848,400 $ 202,000 101,000 303,000 606,000 353,500 404,0ee 9 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 Department Direct materials Direct labor Manufacturing overhead Fabricating S 3,200 3,200 Machining s 200 $ 500 Assembly S 1,600 $ 6,400 Total Plant S 5,000 $10,100 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 2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions a.Compute the predetermined overhead rate for each department for the current year b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job 4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). a.What was the company's bid price on the Koopers job using a plantwide predetermined overhead rate? b.What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?

Explanation / Answer

Fabricating Machining Assemble Total Plant Manufacturing Overhead             3,53,500             4,04,000                 90,900             8,48,400 Direct Labour             2,02,000             1,01,000             3,03,000             6,06,000 Overhead Recovery Rate 1.4 Fabricating Machining Assemble Total Plant Direct Material                   3,200                       200                   1,600                   5,000 Direct Labour                   3,200                       500                   6,400                 10,100 Manufacturing Overhead                   4,480                       700                   8,960                 14,140 Fabricating Machining Assemble Total Plant Manufacturing Overhead             3,53,500             4,04,000                 90,900             8,48,400 Direct Labour             2,02,000             1,01,000             3,03,000             6,06,000 Overhead Recovery Rate 1.75 4 0.3 Fabricating Machining Assemble Total Plant Direct Material                   3,200                       200                   1,600                   5,000 Direct Labour                   3,200                       500                   6,400                 10,100 Manufacturing Overhead                   5,600                   2,000                   1,920                   9,520 Total Cost under plantwide                 29,240 Bid Price                 43,860 Total Price under Departmental                 24,620 Bid Price                 36,930

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