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 production 150,000
Machine-hours required to support estimated production 75,000
Fixed manufacturing overhead cost $ 420,000
Variable manufacturing overhead cost per direct labor-hour $ 4.60
Variable manufacturing overhead cost per machine-hour $ 9.20
During the year, Job 550 was started and completed. The following information is available with respect to this job:
Direct materials $ 195
Direct labor cost $ 288
Direct labor-hours 15
Machine-hours 5
Required:
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?
2. Assume that Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. 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?
(Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Estimated Direct labor-hours= 150,000

Estimated machine-hours= 75,000

Fixed manufacturing overhead cost $ 420,000

Variable manufacturing overhead cost per direct labor-hour $ 4.60

Variable manufacturing overhead cost per machine-hour $ 9.20

Job 550:

Direct materials $ 195

Direct labor cost $ 288

Direct labor-hours 15

Machine-hours 5

1. To calculate the estimated manufacturing overhead rate we need to use the following formula:

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

Estimated manufacturing overhead rate= 420,000/150,000 + 4.6

Estimated manufacturing overhead rate= $7.4 per direct labor hour

Job 550:

Total cost= 195 + 288 + (7.4*15)= $594

Selling price= 594*2= $1,188

2) Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 420,000/75,000 + 9.2

Estimated manufacturing overhead rate= $14.8 per machine-hour

Job 550:

Total cost= 195 + 288 + (14.8*5)= $557

Selling price= 557*2= $1,114