Question

In: Accounting

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication.

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?

Solutions

Expert Solution

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

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