"Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. One of our competitors underbid us by about $11,000 on the Hastings job." "I just can't figure it out," said Hudson. It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Direct labour Manufacturing overhead Cutting $ 306,000 $ 550, 800 Department Machining Assembly $ 204,000 $ 408,000 $ 816,000 $ 102,000 Total Plant $ 918,000 $1,468, 800 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Cutting $15,200 $ 8,500 Department Machining Assembly $ 1,300 $ 6,400 $ 2,500 $ 15,400 ? ? Total Plant $22,900 $26,400 ? The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. 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 material Direct labour Manufacturing overhead Department Cutting Machining Assembly $778,000 $ 92,000 $418,000 $328,000 $216,000 $346,400 $574,000 $853,700 $ 93,700 Total Plant $1,288,000 $ 890,400 $1,521,400 a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. Overapplied overhead cost Underapplied overhead cost b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Cutting Machining Assembly Total plant