\"Blast it!\" said David Wilson, president of Teledex Company. \"We\'ve just los
ID: 341624 • Letter: #
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 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: Department Direct labor Manufacturing overhead Fabricating Machining AssemblyTotal Plant $208,000 $104,000 $312,000$ 624,000 364,000 $416,000 $ 93,600 873,600 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 Machining Assembly Total Plant $ 3,800 $ 400 $ 2,200 $ 6,400 4,400 700 7,000 12,100 The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs.Explanation / Answer
Req A: Department wide overheads rate Fabricating Machining Assembly Total Manufacturing Overheads 364000 416000 93600 873600 Labour Cost 208000 104000 312000 624000 Overhead rate based on labour c ost 175% 400% 30% 140% (Manufacturing OH / Labour cost *100) Pre-determined overheads rate Ffabricating 175% of labour cost machining 400% of labour cost Assembly 30% of labour cost Note: Pre-determined OH rate has also been computed above as 140% of direct labour cost. Req b Overheads allocated Fabricating Machining Assembly Total Labour cost of Kooper Job 4400 700 7000 12100 OH rate 175% 400% 30% Overheads applied 7700 2800 2100 12600 Overheads applied to Kooper Job: $ 12600 Req 2-a Plant wide rate as computed above: 140% COMPUTATION OF BID PRICE UNDER PLANT WIDE OH RATE Fabricating Machining Assembly Total Material cost 3800 400 2200 6400 Labour cost 4400 700 7000 12100 Total Direct cost 8200 1100 9200 18500 Add: OH applied(12100*140%) 16940 Total Cost off Job 35440 Add: mark-up(150% of total cost) 53160 Bid Price 88600 Req 2-b COMPUTATION OF BID PRICE UNDER DEPTT RATE Fabricating Machining Assembly Total Material cost 3800 400 2200 6400 Labour cost 4400 700 7000 12100 Overheads applied-as computed above 7700 2800 2100 12600 Total cost 31100 Add: mark up (150% of cost) 46650 Bid price 77750
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