Reference no: EM132747953
Question - Genex Company produces custom robots for industrial applications. The company uses a job order costing system. Its plant has three production departments: molding, finishing, and assembly. The estimated manufacturing overhead cost and direct labor cost for each department for 2020 follow:
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Molding
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Finishing
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Assembly
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Manufacturing Overhead cost
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$800,000
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$600,000
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$100,000
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Direct labor cost
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$200,000
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$300,000
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$500,000
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In May 2020, the company received an invitation from DeLong Manufacturing Company to bid on an order of three custom robots that must be delivered by the end of September 2020. This DeLong Job would require direct manufacturing costs in the three departments as follows:
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Molding
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Finishing
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Assembly
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Direct material cost
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$12,000
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$800
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$4,600
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Direct labor cost
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$7,000
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$2,000
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$15,000
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Required -
a. Assume that a single, plantwide predetermined manufacturing cost driver rate based on direct labor cost is used. Determine the manufacturing cost driver rate and manufacturing overhead costs applied to the DeLong Job.
b. As an alternative assume that separate, departmental predetermined manufacturing cost driver rates based on direct labor cost are used in each department. Determine the departmental manufacturing cost driver rates and manufacturing overhead costs applied to the DeLong job.
c. Assume that Genex has a policy to add a 70% markup to estimated job costs to arrive at the bid price. Determine the bid price for the DeLong job using:
1. a plantwide manufacturing overhead cost driver rate;
2. departmental manufacturing overhead cost driver rates.
d. Review the bid prices computed in (c). Why do the two bids differ?
e. What are the possible consequences of overbidding a job? Underbidding a job?
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