MANAGERIAL ACCT FOR MANAGERS LL\AC
MANAGERIAL ACCT FOR MANAGERS LL\AC
5th Edition
ISBN: 9781265872298
Author: Noreen
Publisher: MCG
Question
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Chapter 3, Problem 3.15E

1.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead. Absorption costing is used to calculate the cost of product while taking indirect and direct expense into account. Activity based costing assign the cost of all the activity of the organization according to their actual consumption

To compute: The predetermined overhead rate, total manufacturing cost established bit price and cost of goods sold.

1.

Expert Solution
Check Mark

Answer to Problem 3.15E

Plantwide predetermined overhead rate is $20 per machine hour, The Manufacturing cost assigned to job D-70 is $1,460,000 ,Bid price for job D-70 is $2,325,000, Bid price for job C-200 is $3,010,000.

Explanation of Solution

  1. Estimate total fixed manufacturing overhead co
  2. Total overhead cost (Y):

    Estimated total fixed overhead (a) is $910,000

    Estimated variable overhead cost per machine hour molding ( b1 ) is $3.00

    Machine hour for molding required to support estimated production ( X1 ) 20,000

    Estimated variable overhead cost per machine hour for fabrication ( b2 ) $1

    Machine hour fabrication to support estimated production ( X2 ) 30,000

    Total overhead cost (Y): Y=a+b1×X1+b1×X2

      Y=a+b1×X1+b1×X2=$9100,000+($3.00×2000)+($1.00×30000)Y=$1,000,000

      predeterminedoverheadrate=EstimatedtotalmanufacturingoverheadcostEstimatedtotalamountofallocationbase=$1,000,00050,000=$20

    Plantwide predetermined overhead rate is $20 per machine hour

  3. Manufacturing cost assigned to job D-70
    • ParticularMolding FabricationTotal
      Direct materials 375000325000700000
      Direct labor200000160000360000
      Overhead280000120000400000
      Total manufacturing cost8550006050001460000

    The Manufacturing cost assigned to job D-70 is $1,460,000

    Manufacturing cost assigned to job C-220

      ParticularMolding FabricationTotal
      Direct materials 300000250000550000
      Direct labor175000225000400000
      Overhead120000480000600000
      Total manufacturing cost8550009550001550000

    The Manufacturing cost assigned to job D-70 is $1,550,000

  4. Bid price of job D-70
  5. Bid price are 150% of the total manufacturing cost:

    Total manufacturing cost is $1460000

      bidprice=cost×150%=1460000×150100=$2,190,000

    Bid price of job C-200

    Bid price are 150% of the total manufacturing cost:

    Total manufacturing cost is $1460000

      bidprice=cost×150%=1550000×150100=$2,325,000

    Bid price for job D-70 is $2,325,000

  6. Cost of goods sold:
  7.   Cost of goods sold=beginninginventory+Purchaseendinginventory=manufacturingcostofjobD70+manufacturingofjobC200=$1,460,000+$1,550,000=$3,010,000.

Bid price for job C-200 is $3,010,000

2.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead. Absorption costing is used to calculate the cost of product while taking indirect and direct expense into account. Activity based costing assign the cost of all the activity of the organization according to their actual consumption

To compute: The predetermined overhead rate, total manufacturing cost established bit price and cost of goods sold.

2.

Expert Solution
Check Mark

Answer to Problem 3.15E

The unit product cost of D is $90 and R is $50

Explanation of Solution

  1. Total overhead cost (Y):
  2. Estimated total fixed overhead (a) is $700,000

    Estimated variable manufacturing overhead cost per machine hour molding ( b1 ) is $3.00

    Machine hour for molding required to support estimated production ( X1 ) 20,000

    Total overhead cost (Y): Y=a+b1×X1

      Y=a+b1×X1=$700,000+($3.00×2000)Y=$760,000

      predeterminedoverheadrate=EstimatedtotalmanufacturingoverheadcostEstimatedtotalamountofallocationbase=$760,00020,000=$38

      predeterminedoverheadrate=EstimatedtotalmanufacturingoverheadcostEstimatedtotalamountofallocationbase=$240,00030,000=$8

  3. Total manufacturing cost assigned to job D-70
    • Particular Amount
      Direct material 700000
      Direct labor 360000
      Overheads
      Molding department ( 14000MH×38perMH)532000
      Fabrication department ( 6000MH×8perMH)48000
      Total manufacturing cost1640000

    The total manufacturing cost of Job D-70 is $1,640,000.

    Total manufacturing cost assigned to job C-220

      Particular Amount
      Direct material 550000
      Direct labor 400000
      Overheads
      Molding department ( 6000MH×38perMH)228000
      Fabrication department ( 24000MH×8perMH)192000
      Total manufacturing cost1370000

    The total manufacturing cost of Job C-220 is $1,370,000.

  4. Bid price of job D-70
  5. Bid price are 150% of the total manufacturing cost:

    Total manufacturing cost is $1460000

      bidprice=(Totalmanufacturingcost×150%)=1640000×150100=$2,460,000

    Bid price of job C-200

    Bid price are 150% of the total manufacturing cost:

    Total manufacturing cost is $1460000

      bidprice=cost×150%=1370000×150100=$2,055,000

  6. Cost of goods sold:
  7.   Cost of goods sold=beginninginventory+Purchaseendinginventory=manufacturingcostofjobD70+manufacturingofjobC200=$1,640,000+$1,370,000=$3,010,000.

3.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead. Absorption costing is used to calculate the cost of product while taking indirect and direct expense into account. Activity based costing assign the cost of all the activity of the organization according to their actual consumption

The managerial insight revealed in the problem.

3.

Expert Solution
Check Mark

Answer to Problem 3.15E

The overhead rate in molding ($38 per Mh) is much higher than the fabrication. Bid price using job C-200 are lower by $270000 in departmental approach than the plantwide approach as in department approach as in department approach bid price is $1,370,000 whereas in plant wide approach it is $1,550,000.

Explanation of Solution

The result of such a pool in cost is because of the fact that job D-70 is an intensive user of molding machine hours. The overhead rate in molding ($38 per Mh) is much higher than the fabrication. Bid price using job C-200 are lower by $270000 in departmental approach than the plantwide approach as in department approach as in department approach bid price is $1,370,000 whereas in plant wide approach it is $1,550,000. This shows the fact that Job C-200 is an intensive user of fabrication machine hour.

Job order costing system that have a single plant wide overhead cost are mainly used to value closing inventories and cost of goods sold for external reporting purpose. But a single plantwide overhead rate can create inaccurate in internal system and decision.

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