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

Question

Blast it said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers jol 3,000. 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 operates a job order co! system. Manufacturing overhead oost is applied to jobs on the basis of direct labor cost. The follo estimates were made at the beginning of the year: Department Direct labor Manufacturing overhead Fabricating Machining Assembly Total Plant S 206,000 103,000 $ 309,000 S 618,000 885,200 380,500 412,000 92,700 Jobs require varying amounts ofwork in the three departments. The Koopers job, for exampke would have required manufacturing costs in the three departments as follows Department Direct materials Direct labor Manufacturing overhead Fabricating Machining Assembly Total Plant S 3,600300 2,000 5,900 S 4,000 S 600 6,800 $ 11.400 The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs Required: Assuming use ofa plantwide overhead rate a. Compute the rate for the current year etermined overhead rate of direct labor cost b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job overhead cost

Explanation / Answer

Koopers Job Departments Fabrication Machining Assembly Total Plant Direct Labor $                                           206,000.00 $       103,000.00 $     309,000.00 $ 618,000.00 Manufacturing Overhead $                                           360,500.00 $       412,000.00 $       92,700.00 $ 865,200.00 Manufacturing Cost of three Departments Fabrication Machining Assembly Total Plant Direct Material $                                                3,600.00 $                300.00 $          2,000.00 $      5,900.00 Direct Labor $                                                4,000.00 $                600.00 $          6,800.00 $    11,400.00 Manufacturing Overhead 1 Assuming Plantwise Overhead rate a Compute the rate for the current year Predetermined Overhead Rate Estimated total manufacturing Overhead cost/Estimated total amount of alocation base 1.4 140 % of Direct Labor cost b Manufacturing Overhead cost applied to Kooper's Job $                                             15,960.00 2(a) Fabrication Machining Assembly Estimated Manufacturing Overhead Cost $                                           360,500.00 $       412,000.00 $       92,700.00 Estimated Direct Labor cost $                                           206,000.00 $       103,000.00 $     309,000.00 Predetermined Overhead Rate $                                                   175.00 $                400.00 $                30.00 b Overhead Fabrication Department $                                                7,000.00 Machning Department $                                                2,400.00 Assembly department $                                                2,040.00 Total Applied Overhead $                                             11,440.00 4a The Company's bid price was Direct Material $            5,900.00 Direct Labor $          11,400.00 Manufacturing Overhead Applied $          15,960.00 Total Manufacturing Cost $          33,260.00 Bidding Rate $                    1.50 Total Bid Price $          49,890.00 4b If Department Overhead rates had been used , the bid price would have been Direct Material $            5,900.00 Direct Labor $          11,400.00 Manufacturing Overhead Applied $          11,440.00 Total Manufacturing Cost $          28,740.00 Bidding Rate $                    1.50 Total Bid Price $          43,110.00 5 (a) Actual Overhead Cost $       884,500.00 Applied Overhead cost $       837,200.00 Underapplied Overhead Cost $          47,300.00 5(b) Departments Fabrication Machining Assembly Total Plant Actual Overhead cost $                                           369,000.00 $       430,000.00 $       85,500.00 $ 884,500.00 Applied Overhead cost $                                           378,000.00 $       456,000.00 $       80,400.00 $ 914,400.00 Underapplied Overhead $                                             (9,000.00) $       (26,000.00) $          5,100.00 $ (29,900.00)

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