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		21,000		32,000		53,000
Fixed manufacturing overhead cost	$	700,000	$	280,000	$	980,000
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	$	370,000	$	320,000	$	690,000
Direct labor cost	$	240,000	$	140,000	$	380,000
Machine-hours		16,000		5,000		21,000

  

Job C-200	Molding		Fabrication		Total
Direct materials cost	$	280,000	$	240,000	$	520,000
Direct labor cost	$	140,000	$	240,000	$	380,000
Machine-hours		5,000		27,000		32,000

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

Exercise 2-15 (Algo) Part 2

2. Assume Delph chooses to combine its departmental rates from requirement 1 into 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 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

2. a. Total manufacturing overhead for molding = $ 700,000 + 21,000 MH x $ 3.00 = $ 763,000

Total manufacturing overhead for fabrication = $ 280,000 + 32,000 MH x $ 1.00 = $ 312,000

Plantwide predetermined overhead rate = $ ( 763,000 + 312,000 ) / 53,000 MH = $ 20.28 per machine hour

b.

	Job D-70	Job C-200
Direct materials	$ 370,000	$ 320,000
Direct labor	240,000	140,000
Manufacturing overhead	425,880	648,960
Total manufacturing costs	$ 1,035,880	$ 1,108,960

c.

	Job D-70	Job C-200
Total manufacturing costs	$ 1,035,880	$ 1,108,960
Bid price	1,553,820	1,663,440

d. Cost of goods sold = $ 1,035,880 + $ 1,108,960 = $ 2,144,840