Don't tell me we've lost another bid! exclaimed Janice Hudson, president of Prime Products Inc. I'm...
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"Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $14,000 on the Hastings job." "I just can't figure it out," sald Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a Job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Direct labour Manufacturing overhead Department Machining Assembly Cutting $ 325,500 $ 217,000 $ 434,000 $ 585,900 $ 868,000 $ 108,500 Total Plant $ 976,500 $1,562,400 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Department Cutting $25,600 Machining Assembly Total Plant $ 2,600 $ 9,000 $37,200 $15,000 $ 5,100 2 $23,200 ? $43,300 ? The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. Required: 1. Assuming the use of a plantwide overhead rate: a. Compute the rate for the current year. Predetermined overhead rate % b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. Manufacturing overhead cost 3. This part of the question is not part of your Connect assignment. 4. Assume that it is customary in the industry to bid jobs at 140% of total manufacturing cost (direct materials, direct labour, and applied overhead). a. What was the company's bid price on the Hastings job? Company's bid price b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Company's bid price 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the yea Direct material Direct labour Manufacturing overhead Cutting $836,500 $354,000 Machining $619,500 $ 98,500 $235,500 $930,800 Department Assembly $444,000 $367,200 $ 99,400 Total Plant $1,379,000 $ 956,700 $1,649,700 a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Cutting Machining Assembly Total plant "Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $14,000 on the Hastings job." "I just can't figure it out," sald Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a Job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Direct labour Manufacturing overhead Department Machining Assembly Cutting $ 325,500 $ 217,000 $ 434,000 $ 585,900 $ 868,000 $ 108,500 Total Plant $ 976,500 $1,562,400 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Department Cutting $25,600 Machining Assembly Total Plant $ 2,600 $ 9,000 $37,200 $15,000 $ 5,100 2 $23,200 ? $43,300 ? The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. Required: 1. Assuming the use of a plantwide overhead rate: a. Compute the rate for the current year. Predetermined overhead rate % b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. Manufacturing overhead cost 3. This part of the question is not part of your Connect assignment. 4. Assume that it is customary in the industry to bid jobs at 140% of total manufacturing cost (direct materials, direct labour, and applied overhead). a. What was the company's bid price on the Hastings job? Company's bid price b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Company's bid price 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the yea Direct material Direct labour Manufacturing overhead Cutting $836,500 $354,000 Machining $619,500 $ 98,500 $235,500 $930,800 Department Assembly $444,000 $367,200 $ 99,400 Total Plant $1,379,000 $ 956,700 $1,649,700 a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Cutting Machining Assembly Total plant
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Answer 1a To compute the plantwide overhead rate for the current year we can use the following formu... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb
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