Explain the difference between the manufacturing overhead that would have been applied to the Koopers job using the plantwide approach in question 1. (b) and using the departmental approach in question 2 (b). 4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the companys bid price on the 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?
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.
"Blast it" said David Wilson, president of Teledex Company. "We've just lost the bid on the Koopers jon 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 specification and uses a
| Department | |||||||||
| Fabricating | Machining | Assembly | Total Plant | ||||||
| manufacturing overhead | $350,000 | $400,000 | $90,000 | $840,000 | |||||
| direct labor | $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
| Departments | ||||||||
| Fabricating | Machining | Assembly | Total Plant | |||||
| Direct materials | $3,000 | $200 | $1,400 | $4,600 | ||||
| Direct Labor | $2,800 | $500 | $6,200 | $9,500 | ||||
| Manufacturing overhead | ? | ? | ? | ? |
Required:
1. Using the companys 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.
3. Explain the difference between the manufacturing overhead that would have been applied to the Koopers job using the plantwide approach in question 1. (b) and using the departmental approach in question 2 (b).
4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the companys bid price on the 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?
Please answer number 3 & 4
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