Professional Documents
Culture Documents
3.A
Sales: $2 500
Direct Material $1 150
Direct Labor $830
Variable overhead $144 (2$ x 72 MH)
If the fixed cost is lower than the contribution margin, they can still earn profit from
selling Job P90 for $2 500.
3.B If they operate at 100% capacity, the machine hours required to support their
production will become 330 000 MH
The total manufacturing cost will still be higher than the selling price.
Exercise 2-13
1. Predetermined overhead rate for each department
Cutting:
Total fixed manufacturing overhead cost: $264 000
Total variable manufacturing overhead: $96 000
Variable manufacturing overhead per machine hour: $2
Total machine hours 48 000
Total manufacturing overhead cost: $360 000
Finishing:
Total fixed manufacturing overhead cost: $366 000
Total variable manufacturing overhead: $120 000
Variable manufacturing overhead per machine hour: $4
Total direct labor-hours 30 000
Total manufacturing overhead cost: $486 000
Problem 2-19
1. Predetermined overhead rate in the Molding Department and the Painting Department.
Molding Department:
Allocation Base (Machine-hours): 70 000
Fixed manufacturing overhead cost: $497 000
Variable manufacturing overhead per MH: $1.50
Total variable manufacturing overhead: $105 000
Total Manufacturing Overhead Cost: $602 000
Predetermined Overhead Rate $8.6
Painting Department:
Allocation Base (labor-hours): 60 000
Fixed manufacturing overhead cost: $615 000
Variable manufacturing overhead per LH: $2
Total variable manufacturing overhead: $120 000
Total Manufacturing Overhead Cost: $735 000
Predetermined Overhead Rate: $12.25
3. Total manufacturing cost recorded for Job 205. Unit product cost if the job contained 50
units.
Job 205:
Direct materials: $2102
Direct labor: $1995
Total manufacturing overhead: $1975
Total manufacturing cost: $6072
Units produced 50
Unit product cost $121.44
Problem 2-21
1. Manufacturing overhead cost for Job A and Job B if Mason Company uses a plantwide
predetermined overhead rate with DLH as the allocation base
Job A:
Allocation Base (direct labor-hour): 15
Predetermined Overhead Rate: $10 per DLH
Total Manufacturing Overhead: $150
Job B:
Allocation Base (direct labor-hour): 9
Predetermined Overhead Rate: $10 per DLH
Total Manufacturing Overhead: $90
2. Manufacturing overhead cost for Job A and Job B using departmental predetermined
overhead rate
Machining:
Allocation Base (machine-hours): 50 000
Total Manufacturing Overhead: $500 000
Predetermined Overhead Rate: $10
Assembly:
Allocation Base (direct labor-hours): 50 000
Total Manufacturing Overhead: $100 000
Predetermined Overhead Rate: $2
Job A:
Total Manufacturing Overhead - Machining: $110
Total Manufacturing Overhead - Assembly: $20
Total Manufacturing Overhead: $130
Job B:
Total Manufacturing Overhead - Machining: $120
Total Manufacturing Overhead - Assembly: $10
Total Manufacturing Overhead: $130
3. The pricing for Job A would be too high while the pricing for Job B would be too low
Case 2-22:
1. Plantwide approach
Plantwide Predetermined Rate
Allocation Base (direct labor): $600 000
Total manufacturing overhead: $840 000
Predetermined Overhead Rate: $1.4 per $ of direct labor
Koopers Job
Allocation Base (direct labor): $9 500
Predetermined Overhead Rate: $1.4 per $ of direct labor
Total manufacturing overhead $13 300
Fabricating
Allocation Base (direct labor) $200 000
Total manufacturing overhead $350 000
Predetermined Overhead Rate $1.75 per $ of direct labor
Machining
Allocation Base (direct labor) $100 000
Total manufacturing overhead $400 000
Predetermined Overhead Rate $4 per $ of direct labor
Assembly
Allocation Base (direct labor) $300 000
Total Manufacturing Overhead $90 000
Predetermined Overhead Rate $0.3 per $ of direct labor
Koopers Job
Manufacturing overhead - fabricating $4 900
Manufacturing overhead - machining $2 000
Manufacturing overhead - assembly $1 860
Total Manufacturing Overhead Cost $8 760
3. Lower manufacturing overhead cost in departmental predetermined overhead → Low
predetermined overhead rate for the assembly department → accounts to majority of
the direct labor
4. Bid price (150% of manufacturing cost)
Plantwide approach:
Direct materials $4 600
Direct labor $9 500
Manufacturing overhead $13 300
Total manufacturing cost $27 400
Bid price $41 100
Departmental approach:
Direct materials $4 600
Direct labor $9 500
Manufacturing overhead $8 760
Total manufacturing cost $22 860
Bid price $34 290
Exercise 2A-2
1. Traditional approach
Rascon
Direct materials $260 000
Direct labor $120 000
Direct labor hours 8000
Applied Manufacturing Overhead $192 000
Total manufacturing cost $572 000
Unit product cost $28.6
Parcel
Direct materials $1 760 000
Direct labor $240 000
Direct labor hours 16 000
Applied Manufacturing Overhead $384 000
Total manufacturing cost $2 384 000
Unit product cost $29.8
2. Activity-based absorption costing
Rascon
Direct materials $260 000
Direct labor $120 000
Direct labor hours 8000
Applied Manufacturing Overhead - trad $96 000
Applied Manufacturing Overhead - act $144 000
Total manufacturing cost $620 000
Unit product cost $31
Parcel
Direct materials $1 760 000
Direct labor $240 000
Direct labor hours 16 000
Applied Manufacturing Overhead - trad $192 000
Applied Manufacturing Overhead - act $144 000
Total manufacturing cost $2 336 000
Unit product cost $29.2
3. The manufacturing overhead cost for Rascon increased → higher unit product cost,
while the manufacturing overhead cost for Parcel decreased → lower unit product cost