Comprehensive Problem 5

The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Falls, Minnesota, uses a job order costing system for its batch production processes. The St. Falls plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant managers salary, accounting personnel, cafeteria, and human resources, is budgeted at $200,000. During the past year, actual plantwide overhead was $195,000. Each departments overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Falls plant for the past year are as follows:

	Department A			Department B
Budgeted department overhead
(excludes plantwide overhead)	$	169,000		$	504,000
Actual department overhead		135,000			519,000
Expected activity:
Direct labor hours		34,000			10,000
Machine-hours		13,000			42,000
Actual activity:
Direct labor hours		35,500			9,200
Machine-hours		13,500			44,000

For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows:

Direct materials	$	16,000
Direct labor cost:
Department A (2,000 hr)		37,000
Department B (500 hr)		9,000
Machine-hours projected:
Department A		130
Department B		1,200
Units produced		9,000

1.

value: 23.00 points

Required information

Comprehensive Problem 5 Part a

a.1	Assume the St. Falls plant uses a single plantwide overhead rate to assign all overhead (plantwide and department) costs to jobs. Find the overhead rate by using expected direct labor hours. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Overhead rate

$ per direct labor hour

a.2	Determine the projected amount of total manufacturing costs per unit for the units in job no. 110.(Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Manufacturing costs for Job 110

$ per unit

References

WorksheetComprehensive Problem 5 Part aDifficulty: Hard

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2.

value: 36.00 points

Required information

Comprehensive Problem 5 Part b

b.1	Calculate plantwide overhead rate using Machine Hours on projected manufacturing costs for job no. 110. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Plantwide overhead rate

$ per machine hour

b.2	Calculate two separate department overhead rates using Machine Hours on projected manufacturing costs for job no. 110. (Round your answers to 1 decimal place.Omit the "$" sign in your response.)

Overhead rateDepartment A	$ per machine hour
Overhead rateDepartment B	$ per machine hour

b.3

Recalculate the projected manufacturing costs for job no. 110 using three separate rates: one rate for plantwide overhead and two separate department overhead rates, all based on machine-hours. (Round your intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)

Total cost

$ per unit

References

WorksheetComprehensive Problem 5 Part bDifficulty: Hard

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3.

value: 11.00 points

Required information

Comprehensive Problem 5 Part c

c.1

The sales policy at St. Falls dictates that job bids be calculated by adding 22 percent to total manufacturing costs. What would be the bid for job no. 110 using the overhead rate from part a ?(Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bid price

$

c.2

The sales policy at St. Falls dictates that job bids be calculated by adding 22 percent to total manufacturing costs. What would be the bid for job no. 110 using the overhead rate from part b ?(Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bid price

$

c.3

Which of the overhead allocation methods would you recommend ?

	Overhead rate by direct labor hours
	Overhead rate by machine Hours

References

WorksheetComprehensive Problem 5 Part cDifficulty: Hard

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4.

value: 16.00 points

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Comprehensive Problem 5 Part d

d.	Using the allocation rates in part b, compute the under- or overapplied overhead for the St. Falls plant for the year. (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

(Click to select)UnderappliedOverapplied

$

rev: 04_10_2015_QC_CS-12850

References

WorksheetComprehensive Problem 5 Part dDifficulty: Hard

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5.

value: 5.00 points

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Comprehensive Problem 5 Part e

e.

A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $10 per unit. Assume the St. Falls sales force has already committed to the bid price based on the calculations in part b. Should St. Falls buy the $10 per unit part from the subcontractor or continue to make the parts for job no. 110 itself?

Subcontractor

Continue to make the part

References

Multiple ChoiceComprehensive Problem 5 Part eDifficulty: Hard

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6.

value: 9.00 points

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Comprehensive Problem 5 Part f

f.	Would your response to part e change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $17,000?

Yes

No