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EXHIBIT 2-5 Dickson Company: An Example Using Multiple Predetermined Overhead Rates Step 1: Calculate the estimated total manufacturing overhead cost for each department. Miling Department Overhead Cost (Y): Assembly Department Overhead Cost (Y): = $390,000 + ($2.00 per MH X 60.000 MHS) = $500,000 + ($3.75 per DLH X 80,000 DLHs) = $390,000+ $120,000 = $500,000 + $300,000 = $510,000 = $800,000 Step 2: Calculate the predetermined overhead rate in each department. Milling Department Overhead Rate: Assembly Department Overhead Rate: $510,000 $800,000 60,000 machine-hours 80,000 direct labor-hours = $8.50 per machine-hour = $10.00 per direct labor-hour Step 3: Calculate the amount of overhead applied from both departments to Job 407. Milling Department Overhead Applied to Job 407 Assembly Department: Overhead Applied to Job 407 = $8.50 per MH x 90 MHS = $10.00 per DLH x 20 DLHS = $765 = $200 Step 4: Calculate the total job cost for Job 407. Direct materials .......... Direct labor .... Manufacturing overhead applied .......... Total cost of Job 407 Milling Assembly $800 $370 $ 70 $280 $765 $200 Total $1,170 350 965 $2,485 Step 5: Calculate the selling price for Job 407. Total cost of Job 407 .... Markup ($2,485 x 75%) Selling price of Job 407 ........... $2,485.00 1,863.75 $4,348.75 Required information This Excel worksheet relates to the Dickson Company example that is summarized in Exhibit 2-5 2. Change the total fixed manufacturing overhead cost for the Milling Department in Data area back to $390,000, keeping al of the other data the same as in the original example. Consider a new job, Job 408, with the following characteristics: 1 Chapter 2: Applying Excel 3 Cost summary for Job 408 5 Department Milling Assembly 60 40 830 $ 200 133 $ 680 Machine-hours Direct labor-hours Direct materials cost Direct labor cost 6 7 8 $ $ In your worksheet, enter this new data in the cells for Job 407. What is the new selling price for Job 408? (Round your final answer to 2 decimal places.) Selling price for Job 408 3. Without changing the data for the job from requirement 2 above, what is the selling price for Job 408 if the total number of machine-hours in the Assembly Department increases from 3,000 machine-hours to 5,000 machine-hours? (Round your final answer to 2 decimal places.) Selling price for Job 408 4. Restore the total number of machine-hours in the Assembly Department to 3,000 machine-hours. And keep the job data the same as it was in Requirement 2. What is the selling price for Job 408 if the total number of direct labor-hours in the Assembly Department decreases from 80,000 direct labor-hours to 50,000 direct labor-hours? (Round your final answer to 2 decimal places.) Selling price for Job 408
