Question

Manufacturing overhead $ 364,000 $ 416,000 $ 93,600 $ 873,600 Direct labor $ 208,000 $ 104,000 $ 312,000 $ 624,000 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 $ 3,800 $ 400 $ 2,200 $ 6,400 Direct labor $ 4,400 $ 700 $ 7,000 $ 12,100 Manufacturing overhead ? ? ? ?

Answer 1

manufacturing overhead is allocated based on direct labor:

fabricating machining assembling total

Direct labor $208,000 $104,000 $312,000 $624,000

Man. overhead $364,000 $416,000 $93,600 $873,600

overhead rate 1.75 4 0.30 1.4

Koopers job: using departmental overhead rates

fabricating machining assembling total

Direct materials $3,800 $400 $2,200 $6,400

Direct labor $4,400 $700 $7,000 $12,100

overhead rate 1.75 4 0.30

Man. overhead $7,700 $2,800 $2,100 $12,600

total cost $15,900 $3,900 $11,300 $31,100

bid price (150% of total manufacturing cost) = $46,650

Koopers job: using plantwide overhead rate

fabricating machining assembling total

Direct materials $3,800 $400 $2,200 $6,400

Direct labor $4,400 $700 $7,000 $12,100

overhead rate 1.4

Man. overhead $16,940

total cost $35,440

bid price (150% of total manufacturing cost) = $53,160