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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 140, 000 70, 000 $784,000 2$ 2$ 2.00 4.00 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials Direct labor cost Direct labor-hours $175 $ 225 15 Machine-hours 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. cIf Landen uses a markup percentage of 200% of its total manufacturing cost, what sellng price would it establish for Job 550? 2. Assume that Landen's controller believes that machine hours is a better allocotion base than direct labor-hours, Under this approach a. Compute the plantwide predetermined overhead rate b. Compute the total manufacturing cost of Job 550. Cf 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

1) Direct-labor hours
a. Predetermined overhead rate	$                       7.60	per DLH
b. Total manufacturing cost of Job 550	$                        514
c. Selling price	$                     1,542
2) Machine-hours
a. Predetermined overhead rate	$                     15.20	per MH
b. Total manufacturing cost of Job 550	$                        476
c. Selling price	$                     1,428
1)
a) Plant wide predetermined overhead rate
Fixed Manufacturing overhead cost	$                 784,000
Direct labor hours	140,000
Fixed manufacturing overhead per direct labor hour	(784,000 / 140,000)
	$                       5.60
Variable overhead rate per direct labor hour	$                       2.00
Fixed overhead rate per direct labor hour	5.60
Plant wide predetermined overhead rate	$                       7.60
b) Cost of Job 550
Direct materials	$                        175
Direct labor	225
Manufacturing overhead (15 hours × $ 7.60)	114
Cost of Job 550	$                        514
c)
Cost of Job 550	$                        514
Add: Markup percentage 200% ($ 514 × 200%)	1,028
Selling price	$                     1,542
2)
a) Plant wide predetermined overhead rate
Fixed Manufacturing overhead cost	$                 784,000
Machine hours	70,000
Fixed manufacturing overhead per machine hour	(784,000 / 70,000)
	$                     11.20
Variable overhead rate per machine hour	$                       4.00
Fixed overhead rate per machine hour	11.20
Plant wide predetermined overhead rate	$                     15.20
b) Cost of Job 550
Direct materials	$                        175
Direct labor	225
Manufacturing overhead (5 hours × $ 15.20)	76
Cost of Job 550	$                        476
c)
Cost of Job 550	$                        476
Add: Markup percentage 200% ($ 476 × 200%)	952
Selling price	$                     1,428