Plantwide and Departmental Overhead Rates; Job Costs [LO1, LO2, LO3]

Smithson 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:

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-75 and Job C-100. It provided the following information related to those two jobs:

Smithson had no overapplied or underapplied manufacturing overhead during the year.
Required:
1. Assume Smithson uses a plantwide overhead rate based on machine-hours.

a. Compute the predetermined plantwide overhead rate.

b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100.

c. If Smithson establishes bid prices that are 150% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100?

d. What is Smithson’s cost of goods sold for the year?

2. Assume Smithson uses departmental overhead rates based on machine-hours.

a. Compute the predetermined departmental overhead rates.

b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100.

c. If Smithson establishes bid prices that are 150% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100?

d. What is Smithson’s cost of goods sold for the year?
3. What managerial insights are revealed by the computations that you performed in this problem?
(Hint: Do the cost of goods sold amounts that you computed in requirements 1 and 2 differ from one another? Do the bid prices that you computed in requirements 1 and 2 differ from o ne a nother? Why?)

Transcribed Image Text:

Molding Fabrication Total Machine-hours Fixed manufacturing overhead costs Variable manufacturing overhead per machine-hour 20,000 30,000 50,000 $1,100,000 $800,000 $300,000 $5.00 $5.00