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		32,000		52,000
Fixed manufacturing overhead cost	$	740,000	$	240,000	$	980,000
Variable manufacturing overhead cost per machine-hour	$	5.00	$	2.00

  

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	$	370,000	$	320,000	$	690,000
Direct labor cost	$	200,000	$	140,000	$	340,000
Machine-hours		17,000		3,000		20,000

  

Job C-200	Molding		Fabrication		Total
Direct materials cost	$	280,000	$	260,000	$	540,000
Direct labor cost	$	160,000	$	240,000	$	400,000
Machine-hours		3,000		29,000		32,000

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

Required:

1. 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 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

a. Compute the departmental predetermined overhead rates.

	Molding	Fabrication
Fixed manufacturing overhead (A)	740,000	240,000
Machine hours (B)	20,000	32,000
Fixed manufacturing overhead per hour (A) / (B)	37.00 [740,000 / 20,000]	7.50 [240,000 / 32,000]
Variable overhead	5.00	2.00
Total departmental predetermined manufacturing overhead rates	42.00	9.50

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

manufacturing cost = direct labor+direct material +overheads

	D-70	C-200
Direct Material cost	690,000	540,000
Direct Labor	340,000	400,000
Manufacturing overhead	742,500	401,500
Total Manufacturing cost	1,772,500	1,341,500

Working	D-70	C-200
Molding	17,000 * 42.00	3,000 * 42.00
Fabrication	3,000 * 9.50	29,000 * 9.50

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-70	2,658,750	[1,772,500 * 150%]
C-200	2,012,250	[1,341,500 * 150%]

d. What is Delph’s cost of goods sold for the year?

D-70	1,772,500
C-200	1,341,500
Cost of Goods sold	3,114,000