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Garrison, Managerial Accounting 14e Library Course: ACCT 2402-1001 SSI 2013 Chapter 03 Homework instructions | help 6. value: 16.66 points Case 3-29 Plantwide versus Departmental
Garrison, Managerial Accounting 14e Library Course: ACCT 2402-1001 SSI 2013 Chapter 03 Homework instructions | help 6. value: 16.66 points Case 3-29 Plantwide versus Departmental Overhead Rates; Underapplied or Overapplied Overhead [LO1, LO2, LO3, LO7] "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 $5,000 on the Hastings job." "I just can?t figure it out," said Kovallas. "It seems we?re either too high to get the job or too low to make any money on half the jobs we bid anymore. What?s 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 $ 230,000 $ 240,000 $ 430,000 $ 900,000 Manufacturing overhead $ 414,000 $ 864,000 $ 387,000 $ 1,665,000 ________________________________________ 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 $ 12,400 $ 1,000 $ 6,000 $ 19,400 Direct labor $ 6,700 $ 2,100 $ 12,300 $ 21,100 Manufacturing overhead ? ? ? ? ________________________________________ 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. (Round your answer to the nearest whole percent. Omit the "%" sign in your response.) Predetermined overhead rate % 185 of direct labor cost b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Manufacturing overhead cost $ 39035 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. (Round your answers to the nearest whole percent. Omit the "%" sign in your response.) Predetermined overhead rate Cutting Department 180% Machining Department 360% Assembly Department 90% ________________________________________ b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. (Round "Departmental predetermined overhead rate" to the nearest whole percent, other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) Manufacturing overhead cost $ ? 4. Assume that it is customary in the industry to bid jobs at 100 % of total manufacturing cost (direct materials, direct labor, and applied overhead). a. What was the company's bid price on the Hastings job if plantwide overhead rate had been used to apply overhead cost? (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Company's bid price $ ? b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? (Round "Departmental predetermined overhead rate" to the nearest whole percent, other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) Company's bid price $ ? 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 $ 680,000 $ 130,000 $ 450,000 $ 1,260,000 Direct labor 270,000 250,000 225,000 745,000 Manufacturing overhead $ 530,000 $ 870,000 $ 100,000 $ 1,500,000 ________________________________________ a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. (Input the amount as a positive value. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) overhead cost $ ? b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. (Input all amounts as positive values. Round "Departmental predetermined overhead rate" to the nearest whole percent, other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) Cutting Overapplied or underapplied cost $ ? Machining Overapplied or underapplied cost ? Assembly Overapplied or underapplied cost ? ________________________________________ Total Plant Overapplied or underapplied cost $ ? ________________________________________________________________________________
Garrison, Managerial Accounting 14e Library Course: ACCT 2402-1001 SSI 2013 Chapter 03 Homework instructions | help 6. value: 16.66 points Case 3-29 Plantwide versus Departmental Overhead Rates; Underapplied or Overapplied Overhead [LO1, LO2, LO3, LO7] "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 $5,000 on the Hastings job." "I just can't figure it out," said Kovallas. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid anymore. What's 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 Direct labor Manufacturing overhead $ $ Cutting 230,000 414,000 $ $ Machining 240,000 864,000 $ $ Assembly 430,000 387,000 $ $ Total Plant 900,000 1,665,000 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 Direct materials $ Cutting 12,400 $ Machining 1,000 $ Assembly 6,000 $ Total plant 19,400 Direct labor Manufacturing overhead $ 6,700 $ ? 2,100 $ ? 12,300 ? $ 21,100 ? 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. (Round your answer to the nearest whole percent. Omit the "%" sign in your response.) Predetermined overhead rate % 185 of direct labor cost DONE b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Manufacturing overhead cost $ 39035 DONE 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. (Round your answers to the nearest whole percent. Omit the \"%\" sign in your response.) Predetermined overhead rate Cutting Department 180% Machining Department 360% Assembly Department 90% DONE b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. (Round \"Departmental predetermined overhead rate\" to the nearest whole percent, other intermediate calculations and final answers to the nearest dollar amount. Omit the \"$\" sign in your response.) Manufacturing overhead cost $? ?????????? 4. Assume that it is customary in the industry to bid jobs at 100 % of total manufacturing cost (direct materials, direct labor, and applied overhead). a. What was the company's bid price on the Hastings job if plantwide overhead rate had been used to apply overhead cost? (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Company's bid price $? ??????? b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? (Round "Departmental predetermined overhead rate" to the nearest whole percent, other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) Company's bid price $? ?????? 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 Direct materials $ Cutting 680,000 $ Machining 130,000 $ Assembly 450,000 $ Total plant 1,260,000 Direct labor Manufacturing overhead $ 270,000 530,000 $ 250,000 870,000 225,000 100,000 $ $ 745,000 1,500,000 a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. (Input the amount as a positive value. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) overhead cost $? ??????? b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. (Input all amounts as positive values. Round "Departmental predetermined overhead rate" to the nearest whole percent, other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) Cutting Overapplied or underapplied cost $? Machining Overapplied or underapplied cost ? Assembly Overapplied or underapplied cost ? Total Plant Overapplied or underapplied cost $Step by Step Solution
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