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

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= 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= 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