"Blast it!" said Amy Wilson, president of a custom furniture design company, Wilson Woodworking. "We've just lost the bid on theKooper's cabinet by $2,000. It seems we're either too high to get the job or too low to make any money on the jobs we bid. I just don'tunderstand what we are doing wrong!"Wilson Woodworking manufactures cabinets to customers' specifications and uses a job-order costing system. The company uses aplantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) tojobs. The following estimates were made at the beginning of the year:Manufacturing overheadDirect laborJobs require varying amounts of work in the three departments. The Kooper's cabinet job, for example,would have required manufacturing costs in the three departments as follows:Direct materialsDirect laborManufacturing overheadDirect materials.Direct laborManufacturing overheadDepartmentFabricating Machining Assembly Total Plant$ 350,000 $ 400,000 $ 90,000 $ 840,000$ 200,000 $ 100,000 $ 300,000 $ 600,000Fabricating$3,000$2,800?Required 5A Required 5BAnother job for the Smith family would have required different manufacturing costs in the three departments as follows:DepartmentMachining$ 500DepartmentMachining$ 200$ 500?Fabricating$2,000$1,050?Company's bid priceComplete this question by entering your answers in the tabs below.$6500?Assembly$1,400$6,200?Required:5. What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?a. What was the company's bid price on the Kooper job using the departmental predetermined overhead rates?b.What was the company's bid price on the Smith job using the departmental predetermined overhead rates?< Required 5AAssembly$1,200$2,000?Total Plant$4,600$9,500?Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, andapplied overhead). What would the Smith bid price have been if departmental predetermined overhead rates had been usedto apply overhead cost?Total Plant$3,700$9,550?Required 5B >

These predetermined rates are those rates which are used to absorb manufacturing overhead of…

"Blast it!" said Amy Wilson, president of a custom furniture design company, Wilson Woodworking. "We've just lost the bid on the Kooper's cabinet by $2,000. It seems we're either too high to get the job or too low to make any money on the jobs we bid.I just don't understand what we are doing wrong!" Wilson Woodworking manufactures cabinets to customers' specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year:

"Blast it!" said Amy Wilson, president of a custom furniture design company, Wilson Woodworking. "We've just lost the bid on the Kooper's cabinet by $2,000. It seems we're either too high to get the job or too low to make any money on the jobs we bid.I just don't understand what we are doing wrong!" Wilson Woodworking manufactures cabinets to customers' specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Chocolate Bars, Inc. (CBI), manufactures creamy deluxe chocolate candy bars. The firm has developed three distinct products: Almond Dream, Krispy Krackle, and Creamy Crunch. CBI is profitable, but management is quite concerned about the profitability of each product and the product costing methods currently employed. In particular, management questions whether the overhead allocation base of direct labor-hours accurately reflects the costs incurred during the production process of each product. Skipped In reviewing cost reports with the marketing manager, Steve Hoffman, who is the cost accountant, notices that Creamy Crunch appears exceptionally profitable and that Almond Dream appears to be produced at a loss. This surprises both him and the manager, and after much discussion, they are convinced that the cost accounting system is at fault and that Almond Dream is performing very well at the current market price. Steve decides to hire Jean Sharpe, a management consultant, to study the…