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		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.

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

1a) Plantwide predetermine overhead rate = (20000*3+30000*1+910000)/50000 = $20 per machine hour

1b) Calculate total manufacturing cost

	Job D-70	Job C-200
Direct material	700000	550000
Direct labor	360000	400000
Overhead applied	20000*20 = 400000	30000*20 = 600000
Total manufacturing cost	1460000	1550000

1c) Bid price :

Job D-70 = 1460000*1.5 = $2190000

Job C-200 = 1550000*1.5 = $2325000

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