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		60,000
Machine-hours required to support estimated production		30,000
Fixed manufacturing overhead cost	$	180,000
Variable manufacturing overhead cost per direct labor-hour	$	1.00
Variable manufacturing overhead cost per machine-hour	$	2.00

During the year, Job 550 was started and completed. The following information is available with respect to this job:

Direct materials	$	213
Direct labor cost	$	323
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

Required 1
a)	Plantwided predetermined overhead rate
	fixed manufacturing overhead cost				(180000/60000)		3
	variable manufacturing overhead cost per direct labor						1
	Plantwided predetermined overhead rate						4	answer
b)	Total manufacturing cost for job 550
	Direct materials					213
	direct labor cost					323
	overhead applied		(15*4)			60
	total manufacturing cost					596
c)	selling price
	total manufacturing cost *200%
	596*200%
	1192	Answer
Required 2
a)	Plantwided predetermined overhead rate
	fixed manufacturing overhead cost				(180000/30000)		6
	variable manufacturing overhead cost per machine hour						2
	Plantwided predetermined overhead rate						8	answer
b)	Total manufacturing cost for job 550
	Direct materials					213
	direct labor cost					323
	overhead applied		(5*8)			40
	total manufacturing cost					576
c)	selling price
	total manufacturing cost *200%
	576*200%
	1152	Answer