Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments--Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

	Molding			Fabrication			Total
Estimated total machine-hours used		2,500			1,500			4,000
Estimated total fixed manufacturing overhead	$	12,500		$	16,500		$	29,000
Estimated variable manufacturing overhead per machine-hour	$	2.40		$	3.20

	Job P			Job Q
Direct materials	$	23,000		$	13,000
Direct labor cost	$	29,000		$	11,500
Actual machine-hours used:
Molding		2,700			1,800
Fabrication		1,600			1,900
Total		4,300			3,700

Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.

Required:

For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

1. What was the company’s plantwide predetermined overhead rate?

2. How much manufacturing overhead was applied to Job P and how

3. What was the total manufacturing cost assigned to Job P?

4. If Job P included 20 units, what was its unit product cost?

5. What was the total manufacturing cost assigned to Job Q?

6. If Job Q included 30 units, what was its unit product cost?

7. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?

8. What was Sweeten Company’s cost of goods sold for March?

9. What were the company’s predetermined overhead rates in the Molding Department and the Fabrication Department?

10. How much manufacturing overhead was applied from the Molding Department to Job P and how much was applied to Job Q?

11. How much manufacturing overhead was applied from the Fabrication Department to Job P and how much was applied to Job Q?

12. If Job P included 20 units, what was its unit product cost?

13. If Job Q included 30 units, what was its unit product cost?

14. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?

15. What was Sweeten Company’s cost of goods sold for March?

Answer 1

1.

Plant-wide predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours

Plant-wide predetermined overhead rate = $29,000+(2,500*$2.40+1,500*$3.20) / 4,000

Plant-wide predetermined overhead rate = $29,000+6,000+4,800 / 4,000

Plant-wide predetermined overhead rate = $39,800/4,000 = $9.95 per machine hour

2.

Manufacturing overhead applied to Job P = 4,300*$9.95 = $42,785

Manufacturing overhead applied to Job Q = 3,700*$9.95 = $36,815

3.

	Job P
Direct material	$23,000
Direct labor	29,000
Manufacturing overhead applied	42,785
Total manufacturing costs	$94,785

4.

Unit product cost for Job P = $94,785 / 20 = $4,739.25

5.

	Job Q
Direct material	$13,000
Direct labor	11,500
Manufacturing overhead applied	36,815
Total manufacturing costs	$61,315

6.

Unit product cost for Job Q = $61,315 / 30 = $2,043.83

7.

	Job P	Job Q
Direct material	$23,000	$13,000
Direct labor	29,000	11,500
Manufacturing overhead applied	42,785	36,815
Total manufacturing costs	94,785	61,315
Add: Markup@80%	75,828	49,052
Selling price	$170,613 (94,785*180%)	$110,367 (61,315*180%)
Total units	20	30
Selling price per unit	$8,530.65	$3,678.9

8.

Cost of goods sold = $94,785+61,315 = $156,100

9.

Departmental predetermined overhead rate:

Molding department = $12,500+(2,500*$2.4) / 2,500

Molding department = $12,500+6,000 / 2,500 = $7.4 per machine hour

Fabrication department = $16,500+(1,500*$3.20) / 1,500

Fabrication department = $16,500+4,800 / 1,500 = $14.2 per machine hour

10.

Manufacturing overhead applied from Molding department to Job P = 2,700*$7.4 = $19,980

Manufacturing overhead applied from Molding department to Job Q = 1,800*$7.4 = $13,320

11.

Manufacturing overhead applied from Fabrication department to Job P = 1,600*$14.2 = $22,720

Manufacturing overhead applied from Fabrication department to Job Q = 1,900*$14.2 = $26,980

12.

		Job P
Direct material		$23,000
Direct labor		29,000
Manufacturing overhead applied
Molding	$19,980
Fabrication	22,720	42,700
Total manufacturing costs		$94,700
Total units		20
Unit product cost		$4,735

13.

		Job Q
Direct material		$13,000
Direct labor		11,500
Manufacturing overhead applied
Molding	$13,320
Fabrication	26,980	40,300
Total manufacturing costs		$64,800
Total units		30
Unit product cost		$2,160

14.

	Job P	Job Q
Direct material	$23,000	$13,000
Direct labor	29,000	11,500
Manufacturing overhead applied	42,700	40,300
Total manufacturing costs	94,700	64,800
Add: Markup@80%	75,760	51,840
Selling price	$170,460 (94,700*180%)	$116,640 (64,800*180%)
Total units	20	30
Selling price per unit	$8,523	$3,888

15.

Cost of goods sold = $94,700+64,800 = $159,500