Reference no: EM13919128

The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Falls, Minnesota, uses a job order costing system for its batch production processes. The St. Falls plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant manager's salary, accounting personnel, cafeteria, and human resources, is budgeted at $400,000. During the past year, actual plantwide overhead was $385,000. Each department's overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Falls plant for the past year are as follows:

		Department A			Department B
Budgeted department overhead
(excludes plantwide overhead)		$	153,000		$	439,900
Actual department overhead			170,000			459,900
Expected activity:
Direct labor hours			50,000			25,000
Machine-hours			15,000			53,000
Actual activity:
Direct labor hours			50,500			23,900
Machine-hours			15,800			55,000
For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows:
Direct materials	$	21,600
Direct labor cost:
Department A (3,000 hr)		45,000
Department B (1,100 hr)		10,000
Machine-hours projected:
Department A		230
Department B		1,200
Units produced		15,000

a.1.Assume the St. Falls plant uses a single plantwide overhead rate to assign all overhead (plantwide and department) costs to jobs. Find the overhead rate by using expected direct labor hours. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Overhead rate   ______$ per direct labor hour

a.2.Determine the projected amount of total manufacturing costs per unit for the units in job no. 110. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Manufacturing costs for Job 110   _______$ per unit

2.b.1.Calculate plantwide overhead rate using Machine Hours on projected manufacturing costs for job no. 110. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

 Plantwide overhead rate            ______$ per machine hour

b.2.Calculate two separate department overhead rates using Machine Hours on projected manufacturing costs for job no. 110. (Round your answers to 1 decimal place.Omit the "$" sign in your response.)

Overhead rate—Department A     _____$ per machine hour

Overhead rate—Department B     _____$ per machine hour

b.3.Recalculate the projected manufacturing costs for job no. 110 using three separate rates: one rate for plantwide overhead and two separate department overhead rates, all based on machine-hours. (Round your intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)

Total cost          _____$ per unit

3.c.1.The sales policy at St. Falls dictates that job bids be calculated by adding 27 percent to total manufacturing costs. What would be the bid for job no. 110 using the overhead rate from part a ? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bid price            $_____

c.2.The sales policy at St. Falls dictates that job bids be calculated by adding 27 percent to total manufacturing costs. What would be the bid for job no. 110 using the overhead rate from part b ? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bid price            $_____

c.3.Which of the overhead allocation methods would you recommend ?

Overhead rate by direct labor hours

Overhead rate by machine Hours

4.d.Using the allocation rates in part b, compute the under- or overapplied overhead for the St. Falls plant for the year. (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Underapplied or Overapplied?      $_____