Question

Playtime Industries manufactures custom-designed playground equipment for schools and city parks. Playtime expected to incur $664,000 of manufacturing overhead cost, 41,500 of direct labor hours, and $830,000 of direct labor cost during the year (the cost of direct labor is $20 per hour). The company allocates manufacturing overhead on the basis of direct labor hours. During May, Playtime completed Job 301. The job used 155 direct labor hours and required $12,700 of direct materials. The City of Westlake has contracted to purchase the playground equipment at a price of 20% over manufacturing cost.

Required SHOW WORK
1. Calculate the manufacturing cost of Job 301. (hint: remember you have to consider each product cost: direct materials, direct labor and manufacturing overhead)
2. How much will the City of Westlake pay for this playground equipment?
Playtime Industries manufactures custom-designed playground equipment for schools and city parks. Playtime expected to incur $664,000 of manufacturing overhead cost, 41,500 of direct labor hours, and $830,000 of direct labor cost during the year (the cost of direct labor is $20 per hour). The company allocates manufacturing overhead on the basis of direct labor hours. During May, Playtime completed Job 301. The job used 155 direct labor hours and required $12,700 of direct materials. The City of Westlake has contracted to purchase the playground equipment at a price of 20% over manufacturing cost.
Required SHOW WORK
1. Calculate the manufacturing cost of Job 301. (hint: remember you have to consider each product cost: direct materials, direct labor and manufacturing overhead)
2. How much will the City of Westlake pay for this playground equipment?

Answer 1

Answer and Explanation:

The computation is shown below:

1 Calculation of predetermined overhead rate is

Predetermined overhead rate= Estimated Overhead Cost ÷ Direct labor hours

= $664,000 ÷ 41,500

= $16 per direct labor hour.

Now

Calculation of Total Job Cost:-

Direct Materials $12,700

Direct Labor $3,100

(155 direct labor hours × $20 per hour)

Manufacturing Overhead $2,480

(155 direct labor hours × $16 per hour)

Total Job Cost $18,280

2- Calculation of contracted billing price:-

Total manufacturing cost of Job 301 $18,280

Add: Markup on manufacturing cost 20% of $18,280 $3,656

Billing price $21,936