Calculate the equivalent units of production.
Required:
1-a. Calculate the equivalent units of production.
1-b. Calculate the cost per equivalent unit. (Round your answers to 2 decimal places.)
1-c. How much cost should have been assigned to the ending work in process inventory? (Round your intermediate calculations to 2 decimal places.)
1-d. How much cost should have been assigned to the units completed and transferred to finished goods? (Round your intermediate calculations to 2 decimal places.)
Transferred Materials Conversion Totals
In costs
1a Equivalent units of production
1b Cost per Equivalent unit
1c Cost of ending work in process inventory $
1d Cost of units completed and transferred out $
Question 3.
“Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $3,000. It seems we’re either too high to get the job or too low to make any money on half the jobs we bid.”
Teledex Company manufactures products to customers’ specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year:
| Department | ||||||||
| Fabricating | Machining | Assembly | Total Plant | |||||
| Manufacturing overhead | $ | 355,250 | $ | 406,000 | $ | 91,350 | $ | 852,600 |
| Direct labor | $ | 203,000 | $ | 101,500 | $ | 304,500 | $ | 609,000 |
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 | $ | 3,300 | $ | 200 | $ | 1,700 | $ | 5,200 | ||||
| Direct labor | $ | 3,400 | $ | 500 | $ | 6,500 | $ | 10,400 | ||||
| Manufacturing overhead | ? | ? | ? | ? | ||||||||
Required:
1. Using the company’s plantwide approach:
a. Compute the plantwide predetermined rate for the current year.
b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions:
a.Compute the predetermined overhead rate for each department for the current year.
b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
4. 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 using a plantwide predetermined overhead rate?
b.What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?
Using the company’s plant wide approach. Compute the plant wide predetermined rate for the current year.
Predetermined overhead rate _____ % of direct labor cost
Using the company’s plant wide approach. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
Manufacturing overhead cost applied $__________
Suppose that instead of using a plant wide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Compute the predetermined overhead rate for each department for the current year.
Fabrication dept. _____% of direct labor cost
Machining dept. _____% of direct labor cost
Assembly dept. _____% of direct labor cost
Suppose that instead of using a plant wide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
Manufacturing overhead cost applied _______
Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the company’s bid price on the Koopers job using a plant wide predetermined overhead rate?
Company ‘s bid price __________
Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?
Manufacturing overhead cost applied _______
Question 4.
Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: “Wes, I’m not sure how to go about answering the questions that came up at the meeting with the president yesterday.”
“What’s the problem?”
“The president wanted to know the break-even point for each of the company’s products, but I am having trouble figuring them out.”
“I’m sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00.”
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:
| Velcro | Metal | Nylon | ||||
| Annual sales volume | 115,000 | 213,000 | 301,000 | |||
| Unit selling price | $ | 2.40 | $ | 1.40 | $ | 1.60 |
| Variable expense per unit | $ | 1.00 | $ | 0.80 | $ | 1.10 |
Total fixed expenses are $271,000 per year.
All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable numbers of customers.
The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories.