Chapter 3 Q3

Blast it! said David Wilson, president of Teledex Company. Weve just lost the bid on the Koopers job by $3,000. It seems were 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
	Fabricating		Machining		Assembly		Total Plant
Direct labor	$	206,000	$	103,000	$	309,000	$	618,000
Manufacturing overhead	$	360,500	$	412,000	$	92,700	$	865,200

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	$	3,600	$	300	$	2,000	$	5,900
Direct labor	$	4,000	$	600	$	6,800	$	11,400
Manufacturing overhead		?		?		?		?

The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs.

At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year.

	Department
	Fabricating		Machining		Assembly		Total plant
Direct materials	$	196,000	$	16,600	$	120,000	$	332,600
Direct labor		216,000		114,000		268,000		598,000
Manufacturing overhead	$	369,000	$	430,000	$	85,500	$	884,500

a.

Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used.

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	Overapplied overhead cost
Machining	Overapplied overhead cost
Assembly	Underapplied overhead cost
Total plant	Overapplied overhead cost