Chapter 2, Problem 2AE

This Excel worksheet relates to the Dickson Company example that is summarized in Exhibit 2-5. Download the workbook containing this form from Connect, where you will also find instructions about how to use this worksheet form.

You should proceed to the requirements below only after completing your worksheet.
Required:
2. Change the total fixed manufacturing overhead cost for the Milling Department in the Data area back to $390,000, keeping ail of theother data the same as in the original example Determine the selling price for a new job, Job 408, with the following characteristics.You need not bother changing the job number from 407 to 408 in the worksheet.

To determine

Selling price: The cost incurred by selling the product in the market is known as the selling price.

Determine the missing figures in the sheet. After finding the missing figures determine the selling price of Job 408 by replacing the current data with the data given in the question.

Answer to Problem 2AE

Solution: The selling price of Job 408 using current data is $4348.75 and the selling price of Job 408 after replacing the current data with the given data is $2800.

Explanation of Solution

This calculation is done in the workbook and it is explained below,

Part -1- The missing figures in the sheet is determined here.

	Chapter 2: Applying Excel
	Data
	Mark-up on job cost	75%
		Department
		Milling	Assembly
1	Machine hours	60000	3000
2	Direct Labour Hours	8000	80000
3	Total fixed manufacturing overhead cost	$3,90,000.00	$5,00,000.00
4	Variable manufacturing overhead per machine hour	$2.00	$ -
5	Variable manufacturing overhead per direct labour hour	$ -	$ 3.75
	Cost Summary for job 407	Department
		Milling	Assembly
6	Machine hours	90	4
7	Direct Labour Hours	5	20
8	Direct Materials	$800.00	$370.00
9	Direct Labour cost	$70.00	$280.00
	Enter a formula into each of the cells marked with? below
	Step 1: Calculate the estimated total manufacturing overhead cost for each department
		Milling	Assembly
10	Total fixed manufacturing overhead (given)	$3,90,000.00	$5,00,000.00
11	Variable manufacturing overhead per machine hour or direct labour hour (given)	$2.00	$3.75
12	Total machine hours or direct labour hours (given)	60000	80000
13	Total Variable manufacturing overhead (11 x 12)	$1,20,000.00	$3,00,000.00
14	Total manufacturing overhead (10 + 13)	$5,10,000.00	$8,00,000.00
	Step 2: Calculate the pre-determined overhead rate in each department
		Milling	Assembly
15	Total manufacturing overhead (14)	$5,10,000.00	$8,00,000.00
16	Total machine hours or direct labour hours (given)	60000	80000
17	Pre-determined overhead rate per machine hour or direct labour hour (15 divided by 16)	$8.50	$10.00
	Step 3: Calculate the amount of overhead applied to both departments to Job 407
		Milling	Assembly
18	Pre-determined overhead rate per machine hour or direct labour hour (17)	$8.50	$10.00
19	Machine hours or direct labour hours for the job (given)	90	20
20	Manufacturing overhead applied (18 x 19)	$765.00	$200.00
	Step 4: Calculate the total job cost for Job 407
		Milling	Assembly
21	Direct Materials (given)	$800.00	$370.00
22	Direct Labour cost (given)	$70.00	$280.00
23	Manufacturing overhead applied (20)	$765.00	$200.00
24	Total cost of Job 407 (21 + 22 + 23)	$1,635.00	$850.00
	Total cost of Job 407 (Milling + Assembly)	$2,485.00
	Step 5: Calculate the selling price for Job 407
		Milling	Assembly
25	Total cost of Job 407 ( 24)	$1,635.00	$850.00
26	Mark-up (24 x 75%)	$1,226.25	$637.50
27	Selling price of Job 407 (25 + 26)	$2,861.25	$1,487.50
	Total Selling Price (Milling + Assembly)	$4,348.75

Part 2 - The selling price of Job 408 by replacing the current data with data given

	Chapter 2: Applying Excel
	Data
	Mark-up on job cost	75%
		Department
		Milling	Assembly
1	Machine hours	60000	3000
2	Direct Labour Hours	8000	80000
3	Total fixed manufacturing overhead cost	$3,90,000.00	$5,00,000.00
4	Variable manufacturing overhead per machine hour	$2.00	$ -
5	Variable manufacturing overhead per direct labour hour	$ -	$3.75
	Cost Summary for job 408	Department
		Milling	Assembly
6	Machine hours	40	10
7	Direct Labour Hours	2	6
8	Direct Materials	$700.00	$360.00
9	Direct Labour cost	$50.00	$150.00
	Enter a formula into each of the cells marked with? Below
	Step 1: Calculate the estimated total manufacturing overhead cost for each department
		Milling	Assembly
10	Total fixed manufacturing overhead (given)	$3,00,000.00	$5,00,000.00
11	Variable manufacturing overhead per machine hour or direct labour hour (given)	$2.00	$3.75
12	Total machine hours or direct labour hours (given)	60000	80000
13	Total Variable manufacturing overhead (11 x 12)	$1,20,000.00	$3,00,000.00
14	Total manufacturing overhead (10 + 13)	$4,20,000.00	$8,00,000.00
	Step 2: Calculate the pre-determined overhead rate in each department
		Milling	Assembly
15	Total manufacturing overhead (14)	$4,20,000.00	$8,00,000.00
16	Total machine hours or direct labour hours (given)	60000	80000
17	Pre-determined overhead rate per machine hour or direct labour hour (15 divided by 16)	$7.00	$10.00
	Step 3: Calculate the amount of overhead applied to both departments to Job 408
		Milling	Assembly
18	Pre-determined overhead rate per machine hour or direct labour hour (17)	$7.00	$10.00
19	Machine hours or direct labour hours for the job (given)	40	6
20	Manufacturing overhead applied (18 x 19)	$280.00	$60.00
	Step 4: Calculate the total job cost for Job 408
		Milling	Assembly
21	Direct Materials (given)	$700.00	$360.00
22	Direct Labour cost (given)	$50.00	$150.00
23	Manufacturing overhead applied (20)	$280.00	$60.00
24	Total cost of Job 407 (21 + 22 + 23)	$1,030.00	$570.00
	Total cost of Job 407 (Milling + Assembly)	$1,600.00
	Step 5: Calculate the selling price for Job 408
		Milling	Assembly
25	Total cost of Job 407 ( 24)	$1,030.00	$570.00
26	Mark-up (24 x 75%)	$772.50	$427.50
27	Selling price of Job 407 (25 + 26 )	$1,802.50	$997.50
28	Total Selling Price of Job 408 (Milling + Assembly)	$2,800.00

Conclusion

Thus, the selling price of Job 408 after replacing the current data with the given data is $2800.