Question

1. Given the following data, answer the questions below the table:

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Data
Markup on job cost	75%
	Department
	Milling	Assembly
Machine-hours	60,000	3,000
Direct labor-hours	8,000	80,000
Total fixed manufacturing overhead cost	$390,000	$500,000
Variable manufacturing overhead per machine-hour	$2.00
Variable manufacturing overhead per direct labor-hour		$3.75
Cost summary for Job 408	Department
	Milling	Assembly
Machine-hours	60	4
Direct labor-hours	8	40
Direct materials	$900	$470
Direct labor cost	$152	$800

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a) What is the selling price for Job 408? (Round your final answer to 2 decimal places.)

b) What is the selling price for Job 408, if the total number of machine-hours in the Assembly Department increases from 3,000 machine hours to 6,000 machine hours? (Round your final answer to 2 decimal places.)

c) What is the selling price for Job 408, if the total number of direct labor-hours in the Assembly Department decreases from 80,000 direct labor-hours to 50,000 direct labor-hours? (Round your final answer to 2 decimal places.)

Answer 1

Markup on job cost	75%
	Department
	Milling	Assembly
Machine-hours	60,000	3,000
Direct labor-hours	8,000	80,000
Total fixed manufacturing overhead cost	$390,000	$500,000
Fixed overhead rate	$6.50	$6.25
Variable manufacturing overhead per machine-hour	$2.00
Variable manufacturing overhead per direct labor-hour		$3.75
Total predetermined overhead rate	$8.50	$10.00
Cost summary for Job 408	Department
	Milling	Assembly
Machine-hours	60	4
Direct labor-hours	8	40
Direct materials	$900	$470
Direct labor cost	$152	$800
Calculation of Selling price
Direct materials	$1,370
Direct labor cost	$952
Overheads	$910.00
Total cost	$3,232.00
Mark up	$2,424.00
Selling price	$5,656.00
The price will remain the same as $5656 as overheads in Assembly department are not absorbed on the basis of machine hours

C)

Markup on job cost	75%
	Department
	Milling	Assembly
Machine-hours	60,000	3,000
Direct labor-hours	8,000	50,000
Total fixed manufacturing overhead cost	$390,000	$500,000
Fixed overhead rate	$6.50	$10.00
Variable manufacturing overhead per machine-hour	$2.00
Variable manufacturing overhead per direct labor-hour		$3.75
Total predetermined overhead rate	$8.50	$13.75
Cost summary for Job 408	Department
	Milling	Assembly
Machine-hours	60	4
Direct labor-hours	8	40
Direct materials	$900	$470
Direct labor cost	$152	$800
Calculation of Selling price
Direct materials	$1,370
Direct labor cost	$952
Overheads	$1,060.00
Total cost	$3,382.00
Mark up	$2,536.50
Selling price	$5,918.50

Selling price will be $5918.50