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Q5 -15 marks Manny's Manufacturing manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on
Q5 -15 marks | |||||||||||||||
Manny's Manufacturing 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 labour cost. | |||||||||||||||
The following estimates were made at the beginning of the year: | |||||||||||||||
Department | |||||||||||||||
Cutting | Machining | Assembly | Total Plant | ||||||||||||
Direct labour | $ 324,000 | $ 216,000 | $432,000 | $ 972,000 | |||||||||||
Manufacturing overhead | $ 583,200 | $ 864,000 | $108,000 | $1,555,200 | |||||||||||
Jobs require varying amounts of work in the three departments. The company is going to bid on a job that is estimated to require manufacturing costs in the three departments as follows: | |||||||||||||||
Department | |||||||||||||||
Cutting | Machining | Assembly | Total Plant | ||||||||||||
Direct material | $ 24,800 | $ 2,500 | $ 8,800 | $ 36,100 | |||||||||||
Direct labour | $ 14,500 | $ 4,900 | $ 22,600 | $ 42,000 | |||||||||||
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 be applied to the new bid job. | |||||||||||||||
2.Suppose that instead of using a plantwide overhead rate, the company had uses 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 be applied to the new bid job. | |||||||||||||||
3.At the end of the year, the company assembled the followingactualcost data relating to all jobs worked on during the year: | |||||||||||||||
Department | |||||||||||||||
Cutting | Machining | Assembly | Total Plant | ||||||||||||
Direct material | $ 832,000 | $ 98,000 | $442,000 | $1,372,000 | |||||||||||
Direct labour | $ 352,000 | $ 234,000 | $365,600 | $ 951,600 | |||||||||||
Manufacturing overhead | $ 616,000 | $ 924,900 | $ 98,900 | $1,639,800 | |||||||||||
a.Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. | |||||||||||||||
b.For each department and the plant in total, compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. | |||||||||||||||
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