Question

Smithson 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	$	730,000	$	220,000	$	950,000
Variable manufacturing overhead per machine-hour	$	5.00	$	5.00

  

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-75 and Job C-100. It provided the following information related to those two jobs:

Job D-75:	Molding		Fabrication		Total
Direct materials cost	$	377,000	$	329,000	$	706,000
Direct labor cost	$	210,000	$	170,000	$	380,000
Machine-hours		18,000		5,000		23,000

  

Job C-100:	Molding		Fabrication		Total
Direct materials cost	$	280,000	$	290,000	$	570,000
Direct labor cost	$	100,000	$	220,000	$	320,000
Machine-hours		5,000		28,000		33,000

  

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

Assume Smithson uses departmental overhead rates based on machine-hours.

2-a. Compute the predetermined departmental overhead rates. (Round your answer to 2 decimal places.)

         

2-b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100. (Round your intermediate calculations to 2 decimal places.)

          

2-c. If Smithson establishes bid prices that are 120% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100? (Round your intermediate calculations to 2 decimal places.)

          

2-d. What is Smithson’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places.)

       

Answer 1

• All working forms part of the answer
• Requirement 2 ‘a’

Working		Molding Department:	Fabrication Department:
A	Total Fixed Overheads	$                 730,000	$                              220,000
B	Total machine hours	23,000	33,000
C = A/B	Fixed overhead rate	$                      31.74	$                                     6.67
D	Variable Overhead rate	$                        5.00	$                                     5.00
E = C+D	Predetermined Departmental Overhead rates = ANSWER	$                      36.74	$                                   11.67

• Requirement 2 ‘b’

	Job D 75	Job C 100
Molding Department:
Direct material cost	$                 377,000	$                              280,000
Direct Labor cost	$                 210,000	$                              100,000
Manufacturing Overhead [machine hours x $ 36.74)	$                 661,320	$                              183,700
Fabrication Department:
Direct material cost	$                 329,000	$                              290,000
Direct Labor cost	$                 170,000	$                              220,000
Manufacturing Overhead [machine hours x $ 11.67)	$                    58,350	$                              326,760
Total manufacturing cost assigned = ANSWERS	$              1,805,670	$                           1,400,460

• Requirement 2 ‘c’

		Job D 75	Job C 100
A	Total manufacturing cost assigned	$        1,805,670	$                                    1,400,460
B = A x 120%	Bid Price	$        2,166,804	$                                    1,680,552

• Requirement 2 ‘d’

Cost of Goods Sold = Total manufacturing cost of Job D75 and Job C100
= 1805670 + 1400460
= $ 3,206,130 = Answer