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 | 34,000 | 44,000 | 78,000 | ||||
Fixed manufacturing overhead costs | $ | 790,000 | $ | 220,000 | $ | 1,010,000 | |
Variable manufacturing overhead cost per machine-hour | $ | 6.00 | $ | 6.00 | |||
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 | $ | 380,000 | $ | 322,000 | $ | 702,000 |
Direct labor cost | $ | 230,000 | $ | 130,000 | $ | 360,000 |
Machine-hours | 24,000 | 10,000 | 34,000 | |||
Job C-200: | Molding | Fabrication | Total | |||
Direct materials cost | $ | 260,000 | $ | 210,000 | $ | 470,000 |
Direct labor cost | $ | 110,000 | $ | 230,000 | $ | 340,000 |
Machine-hours | 10,000 | 34,000 | 44,000 | |||
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 120% 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?
ANSWER: | (ALL FIGURES IN $ ) | ||
PART - a) | |||
PREDETERMINED DEPARTMENTAL OVERHEAD RATE | |||
Pre determined Overhead Rate = | Estimated Overhead Cost | ||
Base | |||
Particulars | Molding | Fabrication | |
Fixed Manufacturing Overhead Cost | 790000 | 220000 | |
Variable Manufacturing Cost | 204000 | 264000 | |
Estimated Overhead Cost | 994000 | 484000 | |
Machine Hours | 34000 | 44000 | |
Predetermined Overhead Rate | 29.24 | 11.00 | |
TOTAL OVERHEADS = FIXED + VARIABLE OVERHEADS | |||
1010000 + 204000 + 264000 | |||
1478000 | |||
Predetermined Overhead Rate = Total Overheads / Total Machine Hours | |||
1478000 / 78000 | |||
18.95 per hour | |||
PART b) | |||
Total Manufacturing Cost Assigned to Job D -70 & Job C- 200 | |||
Particulars | Molding | Fabrication | Job D 70 |
Machine Hours | 24000 | 10000 | 34000 |
Direct Material Cost | 380000 | 322000 | 702000 |
Direct Labour Cost | 230000 | 130000 | 360000 |
Overhead(Machine Hours * Predetermined OH Rate | 701760 | 110000 | 811760 |
Total Manufacturing Cost | 1335760 | 572000 | 1907760 |
Particulars | Molding | Fabrication | Job C- 200 |
Machine Hours | 6000 | 24000 | 30000 |
Direct Material Cost | 300000 | 250000 | 550000 |
Direct Labour Cost | 175000 | 225000 | 400000 |
Overhead(Machine Hours * Predetermined OH Rate | 175440 | 264000 | 439440 |
Total Manufacturing Cost | 656440 | 763000 | 1419440 |
PART - c) | In $) | ||
Bid Price For D-70 = 120% OF Total Manufacturing Cost i.e. 1907760 | |||
1907760 * 120% | |||
2289312 | |||
Bid Price For C- 200 = 120% OF Total Manufacturing Cost i.e. 1419440 | |||
1419440 * 120 % | |||
1703328 | |||
PART - d) | (In $) | ||
Cost of Goods Sold :Total Overheads + Direct Labour + Direct Material | |||
1478000(Total Overhead as earlier Calculated) | |||
1252000 (702000 + 550000 Direct Material Cost of D 70 & C 200) | |||
760000 (360000 + 400000 i.e. Direct Labour Cost of Both) |
|||
COST OF GOOD SOLD = 3490000 | |||