Question
Blast it! said Amy Wilson, president of a custom furniture design company, Wilson Woodworking. We've just lost the bid on the Kooper's cabinet by
"Blast it!" said Amy Wilson, president of a custom furniture design company, Wilson Woodworking. "We've just lost the bid on the Kooper's cabinet by $2,000. It seems we're either too high to get the job or too low to make any money on the jobs we bid. I just don't understand what we are doing wrong!" Wilson Woodworking manufactures cabinets to customers' specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year: Manufacturing overhead Direct labor Department Fabricating Machining $ 350,000 $400,000 $200,000 $ 100,000 $300,000 Assembly $90,000 Total Plant $840,000 $600,000 Jobs require varying amounts of work in the three departments. The Kooper's cabinet job, for example, would have required manufacturing costs in the three departments as follows: Direct materials Direct labor Manufacturing overhead Fabricating $3,000 Department Machining $ 200 Assembly $1,400 Total Plant $4,600 $2,800 $ 500 $6,200 $9,500 ? ? ? ? Another job for the Smith family would have required different manufacturing costs in the three departments as follows: Department Direct materials Direct labor Manufacturing overhead Required: Fabricating $2,000 $1,050 Machining $ 500 ? $6500 ? Assembly $1,200 $2,000 ? Total Plant $3,700 $9,550 ? 4. Assume that it is customary in the woodworking industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). a. What was the company's bid price on the Kooper job using a plantwide predetermined overhead rate? b. What was the company's bid price on the Smith job using a plantwide predetermined overhead rate? Complete this question by entering your answers in the tabs below. Required 4A Required 4B Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the company's bid price on the Smith job using a plantwide predetermined overhead rate? Company's bid price < Required 4A Required 4B
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