Question

Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2-3] 0.66 Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: points eBook 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 $ 2.00 $ 4.00 Print References During the year, Job 550 was started and completed. The following information is available with respect to this job: $ 175 $ 225 Direct materials Direct labor cost Direct labor-hours Machine-hours

Answer 1

Answer to Requirement 1:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per labor hour * Estimated labor hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $2.00 * 140,000 + $784,000
Estimated manufacturing overhead = $1,064,000

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated labor hours
Predetermined overhead rate = $1,064,000 / 140,000
Predetermined overhead rate = $7.60

Manufacturing overhead applied = Predetermined overhead rate * Actual labor hours
Manufacturing overhead applied = $7.60 * 15
Manufacturing overhead applied = $114

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead applied
Total manufacturing cost = $175 + $225 + $114
Total manufacturing cost = $514

Selling price = Manufacturing cost + Markup
Selling price = $514 + 200% * $514
Selling price = $1,542

Answer to Requirement 2:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $4.00 * 70,000 + $784,000
Estimated manufacturing overhead = $1,064,000

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated machine hours
Predetermined overhead rate = $1,064,000 / 70,000
Predetermined overhead rate = $15.20

Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours
Manufacturing overhead applied = $15.20 * 5
Manufacturing overhead applied = $76

Total manufacturing cost = Direct materials + Direct machine + Manufacturing overhead applied
Total manufacturing cost = $175 + $225 + $76
Total manufacturing cost = $476

Selling price = Manufacturing cost + Markup
Selling price = $476 + 200% * $476
Selling price = $1,428