Accounting question | Accounting homework help

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%u2019s salary, accounting personnel, cafeteria, and human resources, is budgeted at $300,000. During the past year, actual plantwide overhead was $284,000. Each department%u2019s 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)
$
141,100
 
$
616,000
 

Actual department overhead
 
162,000
 
 
636,000
 

Expected activity:
 
 
 
 
 
 

Direct labor hours
 
32,000
 
 
20,000
 

Machine-hours
 
17,000
 
 
44,000
 

Actual activity:
 
 
 
 
 
 

Direct labor hours
 
33,500
 
 
19,400
 

Machine-hours
 
17,800
 
 
46,000
 

 

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
$
23,500
 

Direct labor cost:
 
 
 

Department A (2,600 hr)
 
39,000
 

Department B (1,500 hr)
 
11,600
 

Machine-hours projected:
 
 
 

Department A
 
140
 

Department B
 
1,200
 

Units produced
 
8,000
 

eBook Links (6)references

Section Break
Comprehensive Problem 5
 

Comprehensive Problem 5 Part a

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

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Worksheet
Comprehensive Problem 5 Part a
Difficulty: Hard

2. value:25.00 points
Comprehensive Problem 5 Part b

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%u2014Department A
$ per machine hour

Overhead rate%u2014Department 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.)

 
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Worksheet
Comprehensive Problem 5 Part b
Difficulty: Hard

3. value:25.00 points
Comprehensive Problem 5 Part c

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.)

 
 

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.)

 
 

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

 
 

 

 
Overhead rate by direct labor hours

 
Overhead rate by machine Hours

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Worksheet
Comprehensive Problem 5 Part c
Difficulty: Hard

4. value:25.00 points
Comprehensive Problem 5 Part d

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.)

 

(Click to select) Underapplied Overapplied
$

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Worksheet
Comprehensive Problem 5 Part d
Difficulty: Hard

5. value:10.00 points
Comprehensive Problem 5 Part e

e.

A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $13 per unit. Assume the St. Falls sales force has already committed to the bid price based on the calculations in part b. Should St. Falls buy the $13 per unit part from the subcontractor or continue to make the parts for job no. 110 itself?

 
Subcontractor

 
Continue to make the part

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Multiple Choice
Comprehensive Problem 5 Part e
Difficulty: Hard

6. value:15.00 points
Comprehensive Problem 5 Part f

f.

Would your response to part e change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $27,000?

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