Question

overhead and job costs

EXERCISE 2-12 Computing Predetermined Overhead Rates and Job Costs LO 2-1, LO2-2, LV2-3 Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production ...... Fixed manufacturing overhead cost....... Variable manufacturing overhead cost per machine-hour........ 100.000 $650,000 $3.00 Required: 1. Compute the plantwide predetermined overhead rate. 2. During the year, Job 400 was started and completed. The following information was available with respect to this job: Direct materials ........ Direct labor cost ......... Machine-hours used...... $450 $210 40 Compute the total manufacturing cost assigned to Job 400. 3. If Job 400 includes 52 units, what is the unit product cost for this job? 4. If Moody uses a markup percentage of 120% of its total manufacturing cost, then what selling price per unit would it have established for Job 400? 5. If Moody hired you as a consultant to critique its pricing methodology, what would you say?

Answer 1

(1)-Plantwide predetermined overhead rate

Plantwide predetermined overhead rate = Total estimated manufacturing overhead costs / Total estimated machine hours

= [Variable manufacturing overhead cost + Fixed manufacturing overhead cost] / Total estimated machine hours

= [(100,000 MH x $3.00 per MH) + $650,000] / 100,000 MH

= [$300,000 + $650,000] / 100,000 MH

= $950,000 / 100,000 MH

= $9.50 per MH

(2)-Total manufacturing cost assigned to JOB-400

Total manufacturing cost assigned to JOB-400 = Direct material cost + Direct labor cost + Manufacturing overhead costs

= $450 + $210 + [40 MH x $9.50 per MH]

= $450 + $210 + $380

= $1,040

(3)-Unit product cost

Unit product cost = Total manufacturing cost assigned to JOB-400 / Total number of units produced

= $1,040 / 52 Units

= $20.00 per unit

(4)-Selling price per unit

Selling price per unit = Unit product cost + Mark-up on cost

= $20.00 per unit + [$20.00 per unit x 120%]

= $20.00 per unit + $24.00 per unit

= $44.00 per unit