Question

In: Accounting

Brown Products manufactures specialized goods to customers’ specifications and operates a job-order costing system. Manufacturing overhead...

Brown Products manufactures specialized goods to customers’ specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs based on direct labour cost. The following estimates were made at the beginning of the year:

Department

Cutting

Machining

Assembly

Total Plant

  Direct labour

$

322,500

$

215,000

$

430,000

$

967,500

  Manufacturing overhead

$

580,500

$

860,000

$

107,500

$

1,548,000

Jobs require varying amounts of work in the three departments. The Home Stores job, for example, would have required manufacturing costs in the three departments as follows:

Department

Cutting

Machining

Assembly

Total Plant

  Direct material

$

24,000

$

2,400

$

8,600

$

35,000

  Direct labour

$

14,000

$

4,700

$

22,000

$

40,700

  Manufacturing overhead

?

?

?

?

The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs.

Required:

1. Assuming the use of a plantwide overhead rate:

a. Compute the rate for the current year.

b. Determine the amount of manufacturing overhead cost that would have been applied to the Home Stores job.

  

2. Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:

a. Compute the rate for each department for the current year.

b. Determine the amount of manufacturing overhead cost that would have been applied to the Home Stores job.

  

3. Assume that it is customary in the industry to bid jobs at 140% of total manufacturing cost (direct materials, direct labour, and applied overhead).

a. What was the company’s bid price on the Home Stores job?

b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost?

4. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year:

Department

Cutting

Machining

Assembly

Total Plant

  Direct material

$

827,500

$

97,500

$

440,000

$

1,365,000

  Direct labour

$

350,000

$

232,500

$

364,000

$

946,500

  Manufacturing overhead

$

612,500

$

918,900

$

98,500

$

1,629,900

a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used.

b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used.

Solutions

Expert Solution


Related Solutions

. Gitano Products operates a job-order costing system and applies overhead cost to jobs on the...
. Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $128,800 of manufacturing overhead for an estimated allocation base of $92,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:         Purchase of raw materials...
The Ilarion Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on...
The Ilarion Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. Its predetermined overhead rate was based on a cost formula that estimated $139,500 of manufacturing overhead for an estimated allocation base of $93,000 direct labor dollars. The company has provided the following data.      Inventories Beginning Ending   Raw materials $ 43,000 $ 18,000   Work in process $ 59,000 $ 43,000   Finished goods $ 85,000 $ 68,000 The following...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $111,800 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 137,000 Direct...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $800,000 of manufacturing overhead for an estimated allocation base of $500,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:    Purchase of raw materials $ 510,000...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $120,400 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 133,000 Direct...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $124,600 of manufacturing overhead for an estimated allocation base of $89,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:     Purchase of raw materials$130,000 Direct labor...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $115,700 of manufacturing overhead for an estimated allocation base of $89,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:         Purchase of raw materials $...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $113,100 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 135,000 Direct...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $124,600 of manufacturing overhead for an estimated allocation base of $89,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 139,000 Direct...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $126,000 of manufacturing overhead for an estimated allocation base of $90,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:         Purchase of raw materials $...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT