Answer:
1. Assuming use of a plant-wide overhead rate:
A. Compute the rate for the current year.
- = $903,000 / $645,000 = $1.40 per $ of direct labor cost
B. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
- = $14,300 x 1.4 = $20,020
2. Suppose that instead of using a plant-wide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:
A. Compute the rate for each department for the current year.
- fabricating = $376,250 / $215,000 = $1.75 per $ of direct labor cost
- machining = $430,000 / $107,500 = $4 per $ of direct labor cost
- assembly = $96,750 / $322,500 = $0.30 per $ of direct labor cost
B. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
- fabricating = $5,800 x 1.75 = $10,150
- machining = $800 x $4 = $3,200
- assembly = $7,700 x $0.30 = $2,310
- total = $15,660
3. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead).
A. What was the company's bid price on the Koopers job if a plant-wide overhead rate had been used to apply overhead cost?
- total production costs = $7,900 + $14,300 + $20,020 = $42,220
- bid price = $42,220 x 1.5 = $63,330
B. What would the bid price have been if departmental overhead rates had been used to apply overhead cost?
- total production costs = $7,900 + $14,300 + $15,660 = $37,860
- bid price = $37,860 x 1.5 = $56,790
4. There are no requirements for question 4.
Explanation:
Department
Fabricating Machining Assembly Total Plant
Direct labor $215,000 $107,500 $322,500 $645,000
Man. overhead $376,250 $430,000 $96,750 $903,000
Koopers Job
Fabricating Machining Assembly Total Plant
Direct materials $4,500 $500 $2,900 $7,900
Direct labor $5,800 $800 $7,700 $14,300
