Question

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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		20,000		30,000	50,000
Fixed manufacturing overhead costs	$	700,000	$	210,000	$ 910,000
Variable manufacturing overhead cost per machine-hour	$	3.00	$	1.00

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	$	375,000	$	325,000	$	700,000
Direct labor cost	$	200,000	$	160,000	$	360,000
Machine-hours		14,000		6,000		20,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	300,000	$	250,000	$	550,000
Direct labor cost	$	175,000	$	225,000	$	400,000
Machine-hours		6,000		24,000		30,000

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 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

1-a.
	Molding	Fabrication	Total
Estimated total machine hours used	20000	30000	50000
(*) Estimated variable manufacturing overhead per machine hour	3.00	1.00
Estimated total variable manufacturing overhead	60000	30000	90000
Estimated total fixed manufacturing overhead	700000	210000	910000
Estimated total manufacturing overhead	760000	240000	1000000

Plantwide predetermined overhead rate = Estimated total manufacturing overhead / Estimated total machine hours used = 1000000 / 50000 =

20.00

per MH

1-b.
	Job D-70	Job C-200
Total actual machine hours used	20000	30000
Plantwide predetermined overhead rate	20.00	20.00
Manufacturing overhead applied	400000	600000
	Job D-70	Job C-200
Direct materials	700000	550000
Direct labor cost	360000	400000
Manufacturing overhead applied	400000	600000
Total manufacturing cost	1460000	1550000

1-c.
	Job D-70	Job C-200
Total manufacturing cost	1460000	1550000
Bid price [ @ 150% of total manufacturing cost ]	2190000	2325000

1-d.
Cost of goods sold = Total manufacturing cost of the Jobs sold = 1460000 + 1550000 = 3010000