Question

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		34,000		44,000		78,000
Fixed manufacturing overhead costs	$	730,000	$	300,000	$	1,030,000
Variable manufacturing overhead cost per machine-hour	$	6.00	$	6.00

  

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	$	374,000	$	322,000	$	696,000
Direct labor cost	$	230,000	$	150,000	$	380,000
Machine-hours		24,000		10,000		34,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	210,000	$	250,000	$	460,000
Direct labor cost	$	140,000	$	230,000	$	370,000
Machine-hours		10,000		34,000		44,000

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

2. 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 120% 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?

Answer 1

2a) Departmental overhead rate

Molding OH = 730000/34000+6 = 27.47 per MH

Fabrication OH = 300000/44000+6 = 12.82 per MH

2b) Total manufacturing cost

	Job D-70	Job C-200
Direct material	696000	460000
Direct labor	380000	370000
Molding overhead	659280	274700
Fabrication overhead	128200	435880
Total manufacturing cost	1863480	1540580

2c) Job D-70 = 1863480*1.2 = 2236176

Job C-200 = 1540580*1.2 = 1848696

2d) Cost of goods sold = 1863480+1540580 = 3404060