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		29,000		39,000		68,000
Fixed manufacturing overhead costs	$	740,000	$	270,000	$	1,010,000
Variable manufacturing overhead cost per machine-hour	$	5.50	$	5.50

  

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	$	373,000	$	323,000	$	696,000
Direct labor cost	$	220,000	$	150,000	$	370,000
Machine-hours		21,000		8,000		29,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	230,000	$	230,000	$	460,000
Direct labor cost	$	110,000	$	230,000	$	340,000
Machine-hours		8,000		31,000		39,000

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

Required:

1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

c. If Delph establishes bid prices that are 130% 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

a)

Fixed Manufacturing Overhead Costs	$1,010,000
Variable Manufacturing Overhead Costs (68,000 Machine Hours x $5.50 per Machine Hr)	374,000
Estimated Total Manufacturing Overhead	$1,384,000
Plantwide Predetermined Overhead Rate (Estimated Total Manufacturing Overhead / Estimated Total Machine Hours)	$1,384,000 / 68,000 Machine Hours = $20.35 per Machine Hour

b)

	JOB D-70	JOB C-200
Direct Materials (Molding + Fabrication)	$696,000	$460,000
Direct Labor (Molding + Fabrication)	370,000	340,000
Manufacturing Overhead Applied (Total Machine Hours x Plantwide Predetermined Overhead Rate)	29,000 Machine Hours x $20.35 = 590,150	39,000 Machine Hours x $20.35 = 793,650
Total Manufacturing Cost	$1,656,150	$1,593,650

c)

	JOB D-70	JOB C-200
Bid Price = 130% of Manufacturing Cost	130% of $1,656,150 = $2,152,995	130% of $1,593,650 = $2,071,745

d)

Total Manufacturing Cost for Job D-70	$1,656,150
Total Manufacturing Cost for Job C-200	$1,593,650
Cost of Goods Sold for the year = Total of the Above	$3,249,800