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		30,000		40,000		70,000
Fixed manufacturing overhead costs	$	740,000	$	220,000	$	960,000
Variable manufacturing overhead cost per machine-hour	$	5.10	$	5.10

  

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	$	374,000	$	323,000	$	697,000
Direct labor cost	$	230,000	$	170,000	$	400,000
Machine-hours		24,000		6,000		30,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	260,000	$	260,000	$	520,000
Direct labor cost	$	180,000	$	280,000	$	460,000
Machine-hours		6,000		34,000		40,000

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 150% 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 1

2a.

Computation of Departmental predetermined Overhead Rate
	Moding	Fabrication
Fixed Manufacturing Overhead costs	$7,40,000	$2,20,000
Variable Manufacturing Overhead cost [(30000*$5.10) and (40000*$5.10)]	$1,53,000	$2,04,000
Total Estimated Overhead costs (a)	$8,93,000	$4,24,000
/Total Estimated Machine Hours (b)	30000	40000
Plantwide Overhead Rate (a/b)	$29.77	$10.60

2b:

Computation of Total Manufacturing Costs
	Job D-70	Job C-200
Direct Material Costs	$6,97,000	$5,20,000
Direct Labor Costs	$4,00,000	$4,60,000
Manufacturing Overhead costs (24000*$29.77 + 6000*$10.60) and (6000*$29.77+ 34000*$10.60)	$7,78,000	$5,39,000
Total Manufacturing Costs	$18,75,000	$15,19,000

2c:

Computation of Bid Prices
	Job D-70	Job C-200
Total Manufacturing Costs	$18,75,000	$15,19,000
Bid price (Total Manufacturing Costs*150%)	$28,12,500	$22,78,500

2d:

Computation of Delph's Cost of Goods sold
Total Manufacturing Costs of Job D-70	$18,75,000
Total Manufacturing Costs of Job C-200	$15,19,000
Total Cost of Goods sold	$33,94,000