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Blast it! said David Wilson, president of Teledex Company. Weve just lost the bid on the Koopers job by $3,000. It seems were 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:

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:

Required:

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 companys 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?

Manufacturing overhead Direct labor Department Fabricating Machining $ 372,750 $ 426,000 $ 213,000 $ 106,500 Assembly $ 95,850 $ 319,500 Total Plant $ 894,600 $ 639,000 Direct materials Direct labor Manufacturing overhead Fabricating $ 4,300 $5,400 ? Department Machining $ 300 $ 600 ? Assembly $ 2,700 $7,500 ? Total Plant $ 7,300 $13,500

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