Blast it said David Wilson president of Teledex Company Weve

\"Blast it!\" said David Wilson, president of Teledex Company. “We\'ve just lost the bid on the Koopers job by $3,000. 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 Total Plant Fabricating Machining Assembly Manufacturing overhead 372,750 $ 426,000 $ 95,850 $ 894,600 Direct labor % 213,000 106,500 $ 319,500 $ 639,000 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 Direct labor Manufacturing overhead $4, 300 $5,400 $300 $600 $%2,700 $7,500 $ 7,300 $13,500

Solution

Requirement 1a Plant wide predetermined manufacturing overhead rate = Total manufacturing overheads /Total Direct labour = $894,600/$639,000 =$1.40 per labour dollar Requirement 1b Application of Manufacturing overhead to Koopers Job = Total Direct Labor X predetermined overhead rate = $13,500 X$1.4 = $18,900 Requirement 2a Departmental predetermined manufacturing overhead rate Department Fabrication Machining Assembly Total Plant Manufacturing overhead 372750 426000 95850 894600 Direct labor 213000 106500 319500 639000 Manufacturing overhead rate 175% 400% 30% Requirement 2b Application of Manufacturing overhead to Koopers Job Department Fabrication Machining Assembly Total Direct labor 5400 600 7500 Manufacturing overhead rate 1.75 4 0.3 Manufacturing overhead 9450 2400 2250 14100 (5400 X1.75) (600 X4.00) (7500 X0.3) Requirement 4a Bid Price on the koopers job using a plant wide predetermined overhead rate Direct materials 7300 Direct Labour 13500 Manufacturing overheads applied 18900 Total Manufacturing costs 39700 Bid Price (150% of total manufacturing costs) 59550 Requirement 4b Bid Price on the koopers job using a departmental predetermined overhead rate Direct materials 7300 Direct Labour 13500 Manufacturing overheads applied 14100 Total Manufacturing costs 34900 Bid Price (150% of total manufacturing costs) 52350