Question

Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]

[The following information applies to the questions displayed below.]

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	$	740,000	$	210,000	$	950,000
Variable manufacturing overhead cost per machine-hour	$	5.50	$	5.50

  

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	$	378,000	$	322,000	$	700,000
Direct labor cost	$	230,000	$	160,000	$	390,000
Machine-hours		24,000		7,000		31,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	290,000	$	230,000	$	520,000
Direct labor cost	$	160,000	$	270,000	$	430,000
Machine-hours		7,000		34,000		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.

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

1a

The estimated total manufacturing overhead cost is computed as follows:

Y = $950,000 + ($5.50 per MH)(72,000 MHs)

Estimated fixed manufacturing overhead	950,000
Estimated variable manufacturing overhead: $5.500 per MH × 72,000 MHs	396000
Estimated total manufacturing overhead cost	1,346,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead	1,346,000
÷ Estimated total machine-hours (MHs)	72000	MHs
Predetermined overhead ratw	18.69	per MH

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b & C

Total manufacturing cost assigned to Jobs D-70 and C-200:

	D-70	C-200
Direct materials	700,000	520,000
Direct labor	390,000	430,000
Manufacturing overhead applied ($18.69 per MH × 31,000 MHs; )	579390
		766290
Total manufacturing cost	1,669,390	1,716,290
1c. Bid prices for Jobs D-70 and C-200:
	D-75	C-200
Total manufacturing cost	1,669,390	1,716,290
× Markup percentage (150%)	140%	140%
Bid price	2337146	2402806

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D :

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

Because the company has no beginning or ending inventories and only Jobs D-70 and C-200 were started, completed, and sold during the year, the cost of goods sold is equal to the sum of the manufacturing costs assigned to both jobs of $3,385,680 (=1669390+1716290)