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*Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $13,000 on the Hastings job." "I just can't figure it out," said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Department Direct labour Manufacturing overhead Direct material Direct labour Manufacturing overhead Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Cutting $ 321,000 $ 577,800 Machining $ 214,000 Assembly $ 428,000 $ 856,000 $ 107,000 Cutting Machining Assembly Overapplied overhead cost Overapplied overhead cost Underapplied overhead cost Cutting $ 23, 200 $13,500 7 Department Machining $ 2,300 $ 4,500 7 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year: Total Plant $ 963,000 $1,540,800 Assembly Total Plant $ 8,400 $33,900 $39,400 $21,400 7 7 Department Cutting Machining $823,000 $ 97,000 Assembly $438,000 $348,000 $231,000 $362,400 $609,000 $913,000 $ 98,100 b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Total Plant $1,358,000 $ 941,400 $1,620,100

*Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $13,000 on the Hastings job." "I just can't figure it out," said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Department Direct labour Manufacturing overhead Direct material Direct labour Manufacturing overhead Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Cutting $ 321,000 $ 577,800 Machining $ 214,000 Assembly $ 428,000 $ 856,000 $ 107,000 Cutting Machining Assembly Overapplied overhead cost Overapplied overhead cost Underapplied overhead cost Cutting $ 23, 200 $13,500 7 Department Machining $ 2,300 $ 4,500 7 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year: Total Plant $ 963,000 $1,540,800 Assembly Total Plant $ 8,400 $33,900 $39,400 $21,400 7 7 Department Cutting Machining $823,000 $ 97,000 Assembly $438,000 $348,000 $231,000 $362,400 $609,000 $913,000 $ 98,100 b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Total Plant $1,358,000 $ 941,400 $1,620,100

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter5: Activity-based Costing And Management
Section: Chapter Questions
Problem 64C: Consider the following conversation between Leonard Bryner, president and manager of a firm engaged...
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▬▬▬▬▬▬▬▬▬+ *Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $13,000 on the Hastings job." "I just can't figure it out." said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Department Direct labour Manufacturing overhead Direct material Direct labour Manufacturing overhead Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Cutting $ 321,000 $ 577,800 Cutting Machining Assembly Total plant Machining Assembly $ 214,000 $ 428,000 $ 856,000 $ 107,000 Overapplied overhead cost Overapplied overhead cost Underapplied overhead cost Overapplied overhead cost Department 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year: Department Cutting Machining Assembly $823,000 $ 97,000 $438,000 $348,000 $231,000 $362,400 $609,000 $913,000 $ 98,100 Total Plant $ 963,000 $1,540,800 Cutting Machining $ 23, 200 $ 2,300 $13,500 $ 4,500 हैं: ? Assembly Total Plant $ 8,400 $33,900 $ 21,400 $39,400 b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Total Plant $1,358,000 $ 941,400 $1,620,100
Transcribed Image Text:▬▬▬▬▬▬▬▬▬+ *Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $13,000 on the Hastings job." "I just can't figure it out." said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Department Direct labour Manufacturing overhead Direct material Direct labour Manufacturing overhead Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Direct material Direct labour Manufacturing overhead Cutting $ 321,000 $ 577,800 Cutting Machining Assembly Total plant Machining Assembly $ 214,000 $ 428,000 $ 856,000 $ 107,000 Overapplied overhead cost Overapplied overhead cost Underapplied overhead cost Overapplied overhead cost Department 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year: Department Cutting Machining Assembly $823,000 $ 97,000 $438,000 $348,000 $231,000 $362,400 $609,000 $913,000 $ 98,100 Total Plant $ 963,000 $1,540,800 Cutting Machining $ 23, 200 $ 2,300 $13,500 $ 4,500 हैं: ? Assembly Total Plant $ 8,400 $33,900 $ 21,400 $39,400 b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used. Total Plant $1,358,000 $ 941,400 $1,620,100
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