"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 operates a job order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labor cost. The following estimates were made at the beginning of the year. Department Direct labor Manufacturing overhead Fabricating $ 202,000 $ 353,500 Machining $ 101,000 $ 404,000 Assembly $ 303,000 $ 90,900 Total Plant S 606,000 $ 848.400 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 Direct materials Direct labor Manufacturing overhead Fabricating Machining Assembly Total Plant $ 3,200 $ 200 $ 1,600 $ 5,000 $ 3,200 $ 500 $ 6,400 $ 10,100 ? 2 ? ? The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. Required: 1. Assuming use of a plantwide overhead rate: a. Compute the rate for the current year. Predetermined overhead rate % of direct labor cost b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. Manufacturing overhead cost 2. Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions: a. Compute the rate for each department for the current year. Predetermined Overhead Rate % Fabricating Department Machining department Assembly department % % b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. Manufacturing overhead cost 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). a. What was the company's bid price on the Koopers job if a plantwide overhead rate had been used to apply overhead cost? Company's bid price b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Company's bid price 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year Direct materials Direct labor Manufacturing overhead Department Cutting Machining Assembly Total plant $ 192,000 $ 16,200 $ 116,000 $ 324,200 212,000 110,000 264,000 586,000 362,000 $ 422,000 $ 85,100 $ 869,100 a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. overhead cost b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. (Enter overapplied overhead costs as negative amounts and underapplied overhead costs as positive amounts.) Fabricating Machining Assembly Total plant
