"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $4,000. It seems we're either too high to get the job or too low to make any money on half the jobs we bid. Teledex Company manufactures products 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: Manufacturing overhead Direct labor Fabricating $ 357,000 $ 204,000 Direct materials Direct labor Manufacturing overhead Department Machining $ 408,000 $ 102,000 Fabricating $3,400 $3,600 Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing costs in the three departments as follows: Assembly $ 91,800 $ 306,000 Department Machining $ 300 $600 7 Total Plant $ 855,800 $ 612,000 Asseably $1,80 $6,500 2 Total Plant $ 5,500 5:10,000 Required: 1. Using the company's plantwide approach: a. Compute the plantwide predetermined rate for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job, 2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions: a. Compute the predetermined overhead rate for each department for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $4,000. It seems we're either too high to get the job or too low to make any money on half the jobs we bid. Teledex Company manufactures products 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: Manufacturing overhead Direct labor Fabricating $ 357,000 $ 204,000 Direct materials Direct labor Manufacturing overhead Department Machining $ 408,000 $ 102,000 Fabricating $3,400 $3,600 Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing costs in the three departments as follows: Assembly $ 91,800 $ 306,000 Department Machining $ 300 $600 7 Total Plant $ 855,800 $ 612,000 Asseably $1,80 $6,500 2 Total Plant $ 5,500 5:10,000 Required: 1. Using the company's plantwide approach: a. Compute the plantwide predetermined rate for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job, 2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions: a. Compute the predetermined overhead rate for each department for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:"Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $4,000. It seems we're
either too high to get the job or too low to make any money on half the jobs we bid."
Teledex Company manufactures products 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:
Manufacturing overhead
Direct labor
Fabricating
$ 357,000
$ 204,000
Direct naterials
Direct labor
Manufacturing overhead
Fabricating
$3,400
$3,600
Department
Machining
$ 408,000
$ 102,000
Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing
costs in the three departments as follows:
Required:
1. Using the company's plantwide approach:
Assembly
$ 91,800
$ 306,000
Department
Machining
$ 300
$600
Total Plant
$ 856,800
$ 612,000
Assembly
$ 1,800
$6,600
Total Plant,
$ 5,500
$.10,000
a. Compute the plantwide predetermined rate for the current year.
b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined
overhead rates based on direct labor cost. Under these conditions:
a. Compute the predetermined overhead rate for each department for the current year.
b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
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