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 130,000 65,000 $364,000 $ 4.00 $ 8.00 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 Machine-hours $ 253 $ 349 15 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.) 1. per DLH Direct labor-hours: a. Predetermined overhead rate b. Total manufacturing cost of Job 550 C. Selling price Machine-hours: a. Predetermined overhead rate b. Total manufacturing cost of Job 550 c. Selling price 2. per MH

Answer 1

1) Direct labor-hours:
a) Predetermined overhead rate:
Fixed manufacturing overhead rate ($364,000/130,000)	$2.80
Add: Variable manufacturing overhead cost per direct labor hour	$4
Predetermined overhead rate based on direct labor hours	$6.80
b) Total manufacturing costs of Job 550:
Direct materials	$253
Add: Direct labor	$349
Add: Manufacturing overheads applied ($6.80 * 15 direct labor hours)	$102
Total manufacturing costs of Job 550	$704
c) Selling price of Job 550 ($704 + {$704*200/100})	$2,112
1) Machine-hours:
a) Predetermined overhead rate:
Fixed manufacturing overhead rate ($364,000/65,000)	$5.60
Add: Variable manufacturing overhead cost per machine hour	$8
Predetermined overhead rate based on machine hours	$13.60
b) Total manufacturing costs of Job 550:
Direct materials	$253
Add: Direct labor	$349
Add: Manufacturing overheads applied ($13.60 * 5 machine hours)	$68
Total manufacturing costs of Job 550	$670
c) Selling price of Job 550 ($670 + {$670*200/100})	$2,010

Answer 2

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