In: Accounting
Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:
Molding | Fabrication | Total | |||||
Machine-hours | 23,000 | 33,000 | 56,000 | ||||
Fixed manufacturing overhead costs | $ | 700,000 | $ | 250,000 | $ | 950,000 | |
Variable manufacturing overhead cost per machine-hour | $ | 5.80 | $ | 5.80 | |||
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
Job D-70: | Molding | Fabrication | Total | |||
Direct materials cost | $ | 377,000 | $ | 326,000 | $ | 703,000 |
Direct labor cost | $ | 210,000 | $ | 120,000 | $ | 330,000 |
Machine-hours | 16,000 | 7,000 | 23,000 | |||
Job C-200: | Molding | Fabrication | Total | |||
Direct materials cost | $ | 290,000 | $ | 290,000 | $ | 580,000 |
Direct labor cost | $ | 170,000 | $ | 260,000 | $ | 430,000 |
Machine-hours | 7,000 | 26,000 | 33,000 | |||
Delph had no underapplied or overapplied manufacturing overhead during the year.
2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.
a. Compute the departmental predetermined overhead rates.
b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
c. If Delph establishes bid prices that are 140% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
d. What is Delph’s cost of goods sold for the year?
(a) Departmental overhead rate :
Molding overhead rate = Fixed + Variable
($700000/23000) + $5.80 = $36.23 per Hour
Fabrication overhead rate =
($250000/33000) + $5.80 = $13.38 per hour
(b) Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
|
Job C-200 |
|
Direct material |
$703000 |
$580000 |
Direct labor |
$330000 |
$430000 |
Molding overhead |
(16000 * $36.23) =$579680 |
(7000 * $36.23) =$253610 |
Fabrication overhead |
(7000 * $13.38) =$93660 |
(26000 * $13.38) =$347880 |
Total manufacturing cost |
$1706340 |
$1611490 |
(c) If Delph establishes bid prices that are 140% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
Job D-70 ($1706340 * 140%) |
$2388876 |
Job C-200 ($1611490 * 140%) |
$2256086 |
(d) What is Delph’s cost of goods sold for the year?
Manufacturing cost of Job D-70 + Job C-200
$1706340 + $1611490 = $3317830