Question
Management Accounting I Case 2 With detail explanation, how to calculate all numbers Brown Products manufactures specialized goods to customers specifications and operates a job-order
Management Accounting I Case 2
With detail explanation, how to calculate all numbers
Brown Products manufactures specialized goods to customers specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on basis of direct labour cost. The following estimates were made at the beginning of the year:
| Department | |||||||||||
|
| |||||||||||
| Cutting | Machining | Assembly | Total Plant | ||||||||
Direct labour | $ | 316,500 |
| $ | 211,000 |
| $ | 422,000 |
| $ | 949,500 |
|
Manufacturing overhead | $ | 569,700 |
| $ | 844,000 |
| $ | 105,500 |
| $ | 1,519,200 |
|
Jobs require varying amounts of work in the three departments. The Home Stores job, for example, would have required manufacturing costs in the three departments as follows:
| Department | |||||||||||
| ||||||||||||
| Cutting | Machining | Assembly | Total Plant | ||||||||
Direct material | $ | 20,800 |
| $ | 2,000 |
| $ | 7,800 |
| $ | 30,600 |
|
Direct labour | $ | 12,000 |
| $ | 3,900 |
| $ | 19,600 |
| $ | 35,500 |
|
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.
b. Determine the amount of manufacturing overhead cost that would have been applied to the Home Stores job.
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.
b. Determine the amount of manufacturing overhead cost that would have been applied to the Home Stores job.
3. Assume that it is customary in the industry to bid jobs at 140% of total manufacturing cost (direct materials, direct labour, and applied overhead).
a. What was the companys bid price on the Home Stores job?
b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost?
4. 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 material | $ | 809,500 |
| $ | 95,500 |
| $ | 432,000 |
| $ | 1,337,000 |
|
Direct labour | $ | 342,000 |
| $ | 226,500 |
| $ | 357,600 |
| $ | 926,100 |
|
Manufacturing overhead | $ | 598,500 |
| $ | 895,200 |
| $ | 96,800 |
| $ | 1,590,500 |
|
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started