Question

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		25,000		33,000		58,000
Fixed manufacturing overhead cost	$	780,000	$	260,000	$	1,040,000
Variable manufacturing overhead cost per machine-hour	$	3.00	$	2.00

  

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	$	370,000	$	320,000	$	690,000
Direct labor cost	$	220,000	$	160,000	$	380,000
Machine-hours		16,000		9,000		25,000

  

Job C-200	Molding		Fabrication		Total
Direct materials cost	$	200,000	$	260,000	$	460,000
Direct labor cost	$	100,000	$	220,000	$	320,000
Machine-hours		9,000		24,000		33,000

Delph had no underapplied or overapplied manufacturing overhead during the year.

Required:

1. 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 150% of total manufacturing cost, 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?

Answer 1

2A. Predetermined OH rate

Molding Department

(Total manufacturing expenses/ machine hour)+Variable cost per hour

=($780,000/25,000)+$3

=$34.20 per machine hour

Fabrication department

=($260,000/33,000)+$2

=$9.88 per machine hour

2b.

	D-70	C-200
Material	$690,000	$460,000
Labor	$380,000	$320,000
Manufacturing overhead	$636,120($34.20*16,000)($9.88*9,000)	$544,920($34.20*9,000+($9.88*24,000)
Total Manufacturing cost	$1,706,120 [$690,000+380,000+636,120]	$1,324,920 [$460,000+$320,000+$544,920]

2c. Bid price = 150%

	D-70	C-200
Total Manufacturing cost	$1,706,120 [$690,000+380,000+636,120]	$1,324,920 [$460,000+$320,000+$544,920]
BID price	$2,559,180($1,706,120*150%)	$1,987,380($1,324,920*150%]

2d.cost of goods sold

As there are are no beginning/ ending inventory , total manufacturing cost = Total cost of goods sold

=($1,706,120+1,324,920)

=$3,031,040