Question
Don't tell me we've lost another bid! exclaimed Sandy Kovallas, president of Lenko Products, Inc. I'm afraid so, replied Doug Martin, the operations vice president.
"Don't tell me we've lost another bid!" exclaimed Sandy Kovallas, president of Lenko Products, Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $10,100 on the Hastings job." "I just cant figure it out," said Kovallas. "It seems were either too high to get the job or too low to make any money on half the jobs we bid anymore. Whats happened?" |
Lenko 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 labor cost. The following estimates were made at the beginning of the year: |
Department | ||||||||
Cutting | Machining | Assembly | Total Plant | |||||
Direct labor | $ | 312,000 | $ | 208,000 | $ | 416,000 | $ | 936,000 |
Manufacturing overhead | $ | 533,000 | $ | 920,400 | $ | 91,000 | $ | 1,544,400 |
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: |
Department | ||||||||
Cutting | Machining | Assembly | Total Plant | |||||
Direct materials | $ | 12,100 | $ | 900 | $ | 5,600 | $ | 18,600 |
Direct labor | $ | 6,600 | $ | 1,600 | $ | 12,900 | $ | 21,100 |
Manufacturing overhead | ? | ? | ? | ? | ||||
The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. |
(NOTE: I HAVE DONE PROBLEMS 1-5. I just want to know if I did 5b right. Thank you)
5. | At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year: |
Department | ||||||||
Cutting | Machining | Assembly | Total plant | |||||
Direct materials | $ | 760,000 | $ | 90,000 | $ | 410,000 | $ | 1,260,000 |
Direct labor | 320,000 | 210,000 | 340,000 | 870,000 | ||||
Manufacturing overhead | $ | 561,000 | $ | 831,000 | $ | 91,000 | $ | 1,483,000 |
a. | Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. (Round your intermediate calculations to the nearest percent.) |
b. | Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. (Enter all overapplied values as negative numbers. Round your intermediate calculations to the nearest percent.) |
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