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		25,000		35,000		60,000
Fixed manufacturing overhead costs	$	760,000	$	250,000	$	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	$	375,000	$	324,000	$	699,000
Direct labor cost	$	230,000	$	120,000	$	350,000
Machine-hours		19,000		6,000		25,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	220,000	$	300,000	$	520,000
Direct labor cost	$	140,000	$	300,000	$	440,000
Machine-hours		6,000		29,000		35,000

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. ( Molding Department ___ per Mh, Fabrication Department ____ per Mh)

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. Departmental Pre determined OH rate:

Molding Department = [Total Fixed OH of Molding Department / Machine Hours ] + Variable Cost per MH

Molding Department = [$760000 / 25000 ] + $6.00 = $36.40 Per MH

Fabrication Department = [Total Fixed OH of Fabrication Department / Machine Hours ] + Variable Cost per MH

Fabrication Department = [$250000 / 35000 ] + $6.00 = $13.14 Per MH

2b. Total Manufacturing Cost of Job D 70 & Job C 200

Manufacturing Cost of Job D-70 : Direct Materials + Direct Labor + Molding department Cost + Fabrication department Cost

Manufacturing Cost of Job D-70 : $699000 + $350000 + $36.40 * 19000 + $13.14 * 6000

Manufacturing Cost of Job D-70 : $699000 + $350000 + $691600 + $78840

Manufacturing Cost of Job D-70 : $1819440

Manufacturing Cost of Job C-200 : Direct Materials + Direct Labor + Molding department Cost + Fabrication department Cost

Manufacturing Cost of Job C-200 : $520000 + $440000 + $36.40 * 6000 + $13.14 * 29000

Manufacturing Cost of Job C-200 : $520000 + $440000 + $218400 + $381060

Manufacturing Cost of Job C-200 : $1559460

2c. Bid Prices for Job D-70 and Job C-200

Job D-70: Total Manufacturing cost * 150% = $1819440 * 150% = $2729160

Job C-200: Total Manufacturing cost * 150% = $1559460 * 150% = $2339190

2d. Delphs Cost of Goods sold for the year = Manufacturing cost of Job D-70 + Manufacturing cost of Job C-200

Delphs Cost of Goods sold for the year = $1819440 + $1559460

Delphs Cost of Goods sold for the year = $3378900