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		31,000		41,000		72,000
Fixed manufacturing overhead costs	$	710,000	$	280,000	$	990,000
Variable manufacturing overhead cost per machine-hour	$	5.80	$	5.80

  

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	$	376,000	$	321,000	$	697,000
Direct labor cost	$	220,000	$	130,000	$	350,000
Machine-hours		21,000		10,000		31,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	270,000	$	250,000	$	520,000
Direct labor cost	$	170,000	$	290,000	$	460,000
Machine-hours		10,000		31,000		41,000

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

Exercise 2-15 Part 1

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 140% 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

Ans : 1
Predetermined Overhead Rate based on machine hour
			per hour
Variable Overhead rate per hour
Molding			5.80
Fabrication			5.80
Fixed Overhead rate per hour
Total Fixed Cost	(710000+280000)	990000
Machine Hours	(31000+41000)	72000	13.75
Overhead Rate per machine hour plant wide			25.35

Ans: 2
Total Manufacturing Cost		D-70	C-200
Direct Material Cost
Molding		3,76,000.00	2,70,000.00
Fabrication		3,21,000.00	2,50,000.00
Direct Labour Cost
Molding		2,20,000.00	1,70,000.00
Fabrication		1,30,000.00	2,90,000.00
Overhead Applied on Machine hour
Molding
Variable		1,21,800.00	58,000.00
(Working)		=5.8*21000	=5.8*10000
Fixed		4,80,967.74	2,29,032.26
(Working)		=(710000/31000)*21000	=(710000/31000)*10000
Fabrication
Variable		58,000.00	1,79,800.00
(Working)		=5.8*10000	=5.8*31000
Fixed		68,292.68	2,11,707.32
(Working)		=(280000/41000)*10000	=(280000/41000)*31000
TotaL manufacturing cost		17,76,060.42	16,58,539.58

Ans 3:
Bid Prices
TotaL manufacturing cost		17,76,060.42	16,58,539.58
=140% of Manufacturing cost		24,86,484.59	23,21,955.41

Ans: 4

Cost of goods sold (COGS) refers to the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good.Therefore, fixed cost incurred on machines will not be considered as it will be incurred whether or not any goods are produced

			D-70	C-200
	TotaL manufacturing cost		17,76,060.42	16,58,539.58
Less:	Molding Fixed cost		4,80,967.74	2,29,032.26
Less:	Fabrication Fixed cost		68,292.68	2,11,707.32
	Cost of Goods Sold		12,26,800.00	12,17,800.00