Question

Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates:Direct labor-hours required to support estimated production140,000Machine-hours required to support estimated production70,000Fixed manufacturing overhead cost$784,000Variable manufacturing overhead cost per direct labor-hour$2.00Variable manufacturing overhead cost per machine-hour$4.00During the year, Job 550 was started and completed. The following information is available with respect to this job:Direct materials$175Direct labor cost$225Direct labor-hours15Machine-hours5Required:1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:a. Compute the plantwide predetermined overhead rate.b. Compute the total manufacturing cost of Job 550.c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550

Answer 1

Results are below.

Step-by-step explanation:

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (784,000 / 140,000) + 2

Predetermined manufacturing overhead rate= $7.6 per direct labor hour

Now, we can allocate costs to Job 550 and calculate the total cost:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 7.6*15= $114

Total cost= 114 + 175 + 225

Total cost= $514

Finally, the selling price:

Selling price= 514*1.2= $616.8