"Don't tell me we've lost another bid exclaimed Sandy Kovallas, president of Lerko Products, Incm afraid so," replied Doug Martin, the operations vice president. One of our competitors undertid us by about 510,000 on the Hastings job." just can't figure it out," said Kovallas. "It seems were either too high to get the job or too low to make any money on at the jobs we bid anymore. What's happened Lerko Products manufactures speciated goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jos on the basis of direct labor cost. The wing somates were made at the beginning of the year Culing Department Machining Machining Assembly Manufacturing overhead $540,000 $300,000 $100.000 $ 900.000 1.410.000 Jobis require varying amounts of work in the three departments. The Hastings , for example, w a ve required manufacturing | | $12.000 50.500 Department | | 5 000 51700 | | 5600 5 13.000 | | | 1500 2.200 Manufacturing overhead The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs Required: 1. Assuming the use of a planta de overhead role a compute the rate for the current year of de labour cost The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. Required: 1. Assuming the use of a plantwide overhead rate: a.Compute the rate for the current year. Predetermined overhead rate of direct labour cost b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings 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 Cutting department Machining department Assembly department b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job, Manuachung von COSE 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 Hastings job if the plantwide overhead rate had been used to apply overhead cost? Bid price with plantwide rate b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Bid price with departmental rate 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 Cutting $ 700.000 $ 320,000 $ 500 000 Department Machining $ 90,000 $ 210,000 $ 830.000 Assembly $410,000 $ 340,000 $ 92,000 Total Plant $1,200,000 $ 870,000 $1,482,000 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. Cutting Machining Assembly Total plant overhead cost overhead cost overhead cost overhead cost Dont tell me we've lost another bidra exclaimed Sandy Kovalas, president of Lenko Products, inc. Im so "repiled Doug Martin, the operations vice president one of our competitors undertid us by about 10.000 on the Hastings job just can't figure it out," said Kovas e rs were emer too high to get the job or too low to make any money on all the jobs we bid anymore. What happened Lenko Products manufactures specialized goods to customers' specifications and operates a job ordering system. Manufacturing overhead cost is applied to jobs on Me basis of direct labor conthefoong estimates were made at the beginning of the year Totaal Direct labor Manufacturing overhead $ 100.000 S540.000 $200 X 300.000 $1,400,000 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufactu Cutting $12.000 $ 6,500 Machining S 900 $ 1700 Assembly $ 5.000 13.000 Total Plant $10.500 $ 21200 Direct labor Manufacturing ovetes The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs Required: 1. Assuming the use of a plantwide overhead rate: a.compute the rate for the current year. a.Compute the rate for the current year. Predetermined overhead rate of direct labour cost b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings 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 Cuming department b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings 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 Hastings job if the plantwide overhead rate had been used to apply overhead cost? Bid price with plantwide rate b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Bid price with departmental rate 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 Cutting $760,000 $ 320,000 $ 500.000 Department Machining $ 90,000 $ 210,000 $ 830 000 Assembly $ 410,000 $ 340,000 $ 92.000 Total Plant $ 1.260,000 S 870,000 $1.482,000 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. Cutting Machining Assembly Total plant overhead cost overhead cost overhead cost overhead cost
