Question

Saxon Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on 10,000 machine-hours, total fixed manufacturing overhead cost of $91,000, and a variable manufacturing overhead rate of $2.40 per machine-hour. Job K373, which was for 60 units of a custom product, was recently completed. The job cost sheet for the job contained the following data:

Total machine-hours 120
Direct materials $645
Direct labor cost $3,720
Required:
A. Calculate the estimated total manufacturing overhead for the year.
B. Calculate the predetermined overhead rate for the year.
C. Calculate the amount of overhead applied to Job K373.
D. Calculate the total job cost for Job K373.
E. Calculate the unit product cost for Job K373.
F. If the markup is 50%, what is the price to the customer for Job K373?

Answer 1

Results are below.

Step-by-step explanation:

A. Total manufacturing overhead:

Overhead= 10,000*2.4 + 91,000= $115,000

B. To calculate the predetermined 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= 115,000/10,000

Predetermined manufacturing overhead rate= $11.5 per machine-hour

C. To allocate overhead, we will use the following formula:

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

Allocated MOH= 11.5*120= $1,380

D.

Total job cost= direct material + direct labor + allocated overhead

Total job cost= 645 + 3,720 + 1,380= $5,745

E. Unit product cost= total cost/total units

Unit product cost= 5,745/60= $95.75

F. Markup= 50%

Selling price= 5,745*1.50= $8,617.5