In: Accounting
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 2
2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.
c. If Delph establishes bid prices that are 140% 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?
1) computation of predetermined overhead rate based on machine hours | |||||||||||
Predetermine overhead rate = Estimated total manufacturing overhead cost/estimated total amount of the allocation base | |||||||||||
Calculation of Manufacturing overhead cost | |||||||||||
Manufacturing oh cost = estimated total fixed manufacturing cost+estimated variable cost permachine hour for molding* machine hour for molding required to support estimated production +estimated variable manufacturing oh cost machine hour for facbrication * machine hour for fabrication required to support estimated production | |||||||||||
total manufacturing overhead cost = 950000+(5.50*31000)+(5.50*41000) | |||||||||||
total manufacturing overhead cost = 1346000 | |||||||||||
Computation of predetermine overhead rate | |||||||||||
Predetermine overhead rate = Estimated total manufacturing overhead cost/estimated total amount of the allocation base | |||||||||||
Predetermine overhead rate = 1346000/72000= 18.69 | |||||||||||
the plantwide predetermine overhead rate is $ 18.69 per machine hour | |||||||||||
C) Calculation of Bid price of job D-70 | |||||||||||
first of all we have to calculate total manufacturing cost of job D-70 | |||||||||||
particulars | Molding | Fabrication | total | ||||||||
Dierct material | 378000 | 322000 | 700000 | ||||||||
Direct labour | 230000 | 160000 | 390000 | ||||||||
overheads | 448560 | 130830 | 579390 | ||||||||
( machine hrs* predetermined rate) | (24000*18.69) | (7000*18.69) | |||||||||
total manufacturing cost | 1056560 | 612830 | 1669390 | ||||||||
total manufacturing cost for job D-70= 1669390 | |||||||||||
Total manufacturing cost to job C-200 | |||||||||||
particulars | Molding | Fabrication | total | ||||||||
Dierct material | 290000 | 230000 | 520000 | ||||||||
Direct labour | 160000 | 270000 | 430000 | ||||||||
overheads | 130830 | 635460 | 766290 | ||||||||
( machine hrs* predetermined rate) | (7000*18.69) | (34000*18.69) | |||||||||
total manufacturing cost | 580830 | 1135460 | 1716290 | ||||||||
total manufacturing cost for job C-200 = 1716290 | |||||||||||
Bid Price of Job D-70 | |||||||||||
Total manufacturing cost = 1669390 | |||||||||||
Bid Price of Job D-70 = (140% * total manufacturing cost) | |||||||||||
Bid Price of Job D-70= 140%*1669390 | |||||||||||
Bid price of JOB D-70= 2337146 | |||||||||||
Bid Price of Job C-200 | |||||||||||
Total manufacturing cost = 1716290 | |||||||||||
Bid Price of Job C-200 = (140% * total manufacturing cost) | |||||||||||
Bid Price of Job C-200= 140%*1716290 | |||||||||||
Bid Price of Job C-200= 2402806 | |||||||||||
D) Cost of goods Sold = opening /beginning inventory +purchases- closing inventory | |||||||||||
in the given question co has no opening and closing inventory when job started completed and production is sold during the year hence the | |||||||||||
cost of goods sold during the year will be | |||||||||||
Cost of goods Sold = manufacturing cost of joB D-70+Manufacturing cost of job C-200 | |||||||||||
Cost of goods sold = $1669390+$1716290 | |||||||||||
Cost of goods sold = $3385680 |