CASE 3-22 Plantwide versus Departmental Overhead Rates; Pricing LO3-1, LO3-2, LO3-3, LO3-4 "Blast it!" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers job by $2,000. 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: Department Fabricating Machining Assembly Total Plant $90,000 $840,000 Manufacturing overhead. Direct labor .. $350,000 $400,000 $200,000 $100,000 $300,000 $600,000 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: Department Fabricating Machining Assembly Total Plant Direct materials. $3,000 $200 $1,400 $4,600 $9,500 Direct labor $2,800 $500 $6,200 Manufacturing overhead.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
CS_2_WR_Q_4_PIR:
Question 4: Assume that it is customary in the industry to bid jobs at 150% of total
(direct materials, direct labor, and applied
Koopers job using a plantwide predetermined overhead rate? What would the bid price have
been if departmental predetermined overhead rates had been used to apply overhead cost?
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