Blast it$!$ said David Wilson, president of Teledex Company. $$We$$ve just lost the bid on the Koopers job by $$2,000.$ It seems we$$re either too high to get the job or too low to make any money on half the jobs we bid.$$

Teledex Company manufactures products 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:

Department

Fabricating Machining Assembly Total Plant

Manufacturing overhead $$350,000$ $$400,000$ $$90,000$ $ $840,000$

Direct labor $$200,000$ $ $100,000$ $$300,000$ $$600,000$

Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing costs in the three departments as follows:

Department

Fabricating Machining Assembly Total Plant

Direct materials $ $3,000$ $$200$ $$1,400$ $$4,600$

Direct labor $$2,800$ $$500$ $$6,200$ $$9,500$

Manufacturing overhead $????$

Required:

$1.$Using the company$$s plantwide approach:

a$.$Compute the plantwide predetermined rate for the current year.

b$.$Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

$2.$Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions:

a$.$Compute the predetermined overhead rate for each department for the current year.

b$.$Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

$3.$Explain the difference between the manufacturing overhead that would have been applied to the Koopers job using the plantwide approach in question $1($b$)$ and using the departmental approach in question $2($b$).$

$4.$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 Koopers job using a plantwide predetermined overhead rate? What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?