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	$	750,000	$	300,000	$	1,050,000
Variable manufacturing overhead cost per machine-hour	$	5.30	$	5.30

  

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	$	371,000	$	325,000	$	696,000
Direct labor cost	$	250,000	$	160,000	$	410,000
Machine-hours		24,000		6,000		30,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	240,000	$	220,000	$	460,000
Direct labor cost	$	180,000	$	250,000	$	430,000
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 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?

Answer 1

Based on the information available in the question, we can calculate the following:-

A.) Predetermined Overhead rates:-

Overhead Rate = (Fixed manufacturing expense/Machine hours) + Variable rate per hour

Molding Department = ($750,000/30,000) + $5.30

Molding Department = $25 + $5.30

Molding department predetermined overhead rate = $30.30

Fabrication Department = ($300,000/40,000) + $5.30

Fabrication Department = $7.5 + $5.30

Fabrication department predetermined overhead rate = $12.80

Requirement 2:

The total manufacturing cost assigned to Job D-70 and Job C-200

Particulars	Job D70	Job C200
Direct Materials	696,000	460,000
Direct Labor	410,000	430,000
Overhead cost	804,000	617,000
Total costs	1,910,000	1,507,000

Overhead costs for Job D70 = (24,000 hours * 30.30) + (6,000 hours * 12.80) = $727,200 + $76,800 = $804,000

Overhead costs for Job C200 = (6,000 hours * 30.30) + (34,000 hours * 12.80)= $181,800 + $435,200 = $617,000

Requirement 3:-

Bid Prices:-

Bid Prices
Particulars	Job D70	Job C200
Manufacturing costs	1,910,000	1,507,000
Add:- Markup at 20%	382,000	301,400
Bid Prices	2,292,000	1,808,400

Requirement 4:-

Cost of Goods sold = $1,910,000 + $1,507,000

Cost of Goods sold = $3,417,000