The following infomaron apples zo the questions disoloyed below! Smithson Company uses a Job-order costing system and has two manufacturing departments-Molding and Fabrication. The company provided the following estimates at the beginning of the year. Fabrica Luon Total Machine hours 26.000 36,000 62,000 740,000 250,000 990,000 ufacturing overh Vorable manufacturing ove ead per machine-hou Dunng the year, the company had no beginning or ending inventores and t started, completed, and sold only two jobs-Job D-75 and Job C100. provided the following information related to those two jobs: Molding Fabricauon Job D-75 375.000 328.000 706.000 Direct materials cost 250.000 150.000 400.000 Direct labor cost Machine-hours Job C-100 Molding Fobricotion 200000 S490.000 Direct materlals cost 290,000 50.000 260,000 S 410,000 Direct labor cost Machine h 8,000 28,000 36,000 Smithson had no overopplied or underapplied manufactu g overhead during the yea
1-a. Compute the predetermined plantwide overhead rate. (Round your answer to 2 decimal places.)
1-b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100. (Round your intermediate calculations to 2 decimal places.)
1-c. If Smithson establishes bid prices that are 120% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100? (Round your intermediate calculations to 2 decimal places.)
1-d. What is Smithson’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places.)
The Correct Answer and Explanation is :
1-a. Predetermined Plantwide Overhead Rate
To calculate the predetermined plantwide overhead rate, we need to divide the total estimated manufacturing overhead by the total estimated machine hours for the year.
The formula is:
[
\text{Predetermined Overhead Rate} = \frac{\text{Total Estimated Overhead}}{\text{Total Estimated Machine Hours}}
]
Given:
- Total Estimated Manufacturing Overhead = $740,000 (Molding) + $250,000 (Fabrication) = $990,000
- Total Estimated Machine Hours = 62,000 (Molding) + 250,000 (Fabrication) = 312,000 machine hours
Now calculate the predetermined overhead rate:
[
\text{Predetermined Overhead Rate} = \frac{990,000}{312,000} = 3.17 \text{ per machine hour}
]
Answer: The predetermined plantwide overhead rate is $3.17 per machine hour.
1-b. Total Manufacturing Costs Assigned to Job D-75 and Job C-100
The total manufacturing cost consists of direct materials cost, direct labor cost, and allocated manufacturing overhead.
We will calculate the overhead for each job by multiplying the machine hours used by the predetermined overhead rate.
Job D-75:
- Direct Materials Cost:
- Molding: $250,000
- Fabrication: $150,000
- Total: $400,000
- Direct Labor Cost:
- Molding: $375,000
- Fabrication: $328,000
- Total: $703,000
- Machine Hours:
- Molding: 8,000 hours
- Fabrication: 28,000 hours
- Total: 36,000 machine hours
Allocated Manufacturing Overhead:
[
\text{Overhead for Job D-75} = 36,000 \text{ hours} \times 3.17 = 114,120
]
Total Manufacturing Costs for Job D-75:
[
\text{Total Manufacturing Costs} = 400,000 + 703,000 + 114,120 = 1,217,120
]
Job C-100:
- Direct Materials Cost:
- Molding: $200,000
- Fabrication: $490,000
- Total: $690,000
- Direct Labor Cost:
- Molding: $290,000
- Fabrication: $50,000
- Total: $340,000
- Machine Hours:
- Molding: 8,000 hours
- Fabrication: 28,000 hours
- Total: 36,000 machine hours
Allocated Manufacturing Overhead:
[
\text{Overhead for Job C-100} = 36,000 \text{ hours} \times 3.17 = 114,120
]
Total Manufacturing Costs for Job C-100:
[
\text{Total Manufacturing Costs} = 690,000 + 340,000 + 114,120 = 1,144,120
]
1-c. Bid Prices for Job D-75 and Job C-100
Smithson establishes bid prices that are 120% of total manufacturing costs.
Bid Price for Job D-75:
[
\text{Bid Price for Job D-75} = 120\% \times 1,217,120 = 1,460,544
]
Bid Price for Job C-100:
[
\text{Bid Price for Job C-100} = 120\% \times 1,144,120 = 1,372,944
]
1-d. Cost of Goods Sold (COGS) for the Year
Since Smithson completed and sold only two jobs, the cost of goods sold (COGS) for the year is the sum of the total manufacturing costs for Job D-75 and Job C-100.
[
\text{COGS} = 1,217,120 + 1,144,120 = 2,361,240
]
Summary of Results:
- 1-a: The predetermined plantwide overhead rate is $3.17 per machine hour.
- 1-b: The total manufacturing costs for Job D-75 and Job C-100 are $1,217,120 and $1,144,120, respectively.
- 1-c: The bid prices for Job D-75 and Job C-100 are $1,460,544 and $1,372,944, respectively.
- 1-d: The total cost of goods sold for the year is $2,361,240.
This process involves calculating overhead costs using the predetermined rate, adding them to direct material and labor costs, and determining the total manufacturing costs and bid prices based on a markup. The cost of goods sold is simply the sum of the costs of the jobs that were sold during the year.