Plant wide Predetermined Overhead Rates; Pricing Landen Corporation uses a job-o
ID: 2524648 • Letter: P
Question
Plant wide Predetermined Overhead Rates; Pricing Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates Item Direct labor-hours required to support estimated production 140,000 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour$2.00 Variable manufacturing overhead cost per machine-hour 70,000 $784,000 $4.00 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials $175 Direct labor cost $225 Direct labor-hours 15 Machine-hoursExplanation / Answer
Answer 1:
(a) Given:
Estimated Fixed manufacturing overhead cost = $784,000
Estimated direct labor hours = 140,000
Hence,
Plant wide predetermined overhead rate = $784,000 / 140,000 = $5.60 per direct labor hour.
(b)
Total manufacturing cost of Job 550:
(c) Based on markup % of 200%, selling price of Job 550 = $534 * (1 + 200%) = $1,602
Answer 2:
Estimated Fixed manufacturing overhead cost = $784,000
Estimated machine hours = 70,000
Hence,
Plant wide predetermined overhead rate = $784,000 / 70,000 = $11.20 per machine hour.
(b)
Total manufacturing cost of Job 550:
(c) Based on markup % of 200%, selling price of Job 550 = $506 * (1 + 200%) = $1,518
Direct material $175 Direct labor $225 Variable manufacturing overhead (labor hours basis) = 15 * $2 $30 Variable manufacturing overhead (machine hours basis) = 5 * $4 $20 Allocated Fixed manufacturing overhead = $5.60 * 15 $84 Total Manufacturing cost $534