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		20,000		30,000	50,000
Fixed manufacturing overhead costs	$	700,000	$	210,000	$ 910,000
Variable manufacturing overhead cost per machine-hour	$	3.00	$	1.00

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	$	375,000	$	325,000	$	700,000
Direct labor cost	$	200,000	$	160,000	$	360,000
Machine-hours		14,000		6,000		20,000

  

Job C-200:	Molding		Fabrication		Total
Direct materials cost	$	300,000	$	250,000	$	550,000
Direct labor cost	$	175,000	$	225,000	$	400,000
Machine-hours		6,000		24,000		30,000

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

Required:

1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

c. If Delph establishes bid prices that are 150% 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-a. Plantwide predetermined overhead rate: $20 per machine hour

Fixed manufacturing overhead costs	910000
Variable manufacturing overhead costs:
Molding (20000 x $3)	60000
Fabrication (30000 x $1)	30000
Total manufacturing overhead costs $	1000000
÷ Machine hours	50000
Plantwide predetermined overhead rate $	20

1-b.

	Job D-70	Job C-200
Direct materials	700000	550000
Direct labor	360000	400000
Manufacturing overheads	400000	600000
	(20000 x $20)	(30000 x $20)
Total manufacturing cost $	1460000	1550000

1-c.

	Job D-70	Job C-200
Total manufacturing cost $	1460000	1550000
Bid Price $	2190000	2325000
	($1460000 x 150%)	($1550000 x 150%)

1-d. Cost of goods sold = $1460000 + $1550000 = $3010000