Question

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		159,000
Fixed manufacturing overhead cost	$	654,000
Variable manufacturing overhead cost per machine-hour	$	4.80

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	$	330
Direct labor cost	$	200
Machine-hours used		38

Compute the total manufacturing cost assigned to Job 400.

3. If Job 400 includes 60 units, what is the unit product cost for this job?

4. If Moody uses a markup percentage of 110% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Answer 1

1. Plantwide predetermined overhead rate = [ Estimated fixed manufacturing overhead cost / Estimated machine hours ] + Estimated variable manufacturing overhead cost per machine hour = [ $654,000 / 159,000 machine hours ] + $4.80 = $4.11 + $4.80 = $8.91

2. Job 400 :

Direct materials	$330
Direct labor cost	$200
Manufacturing overhead applied [ 38 machine hours * $8.91 ]	$339
Total manufacturing cost	$869

3. Unit product cost of Job 400 = Total manufacturing cost / Number of units = $869 / 60 units = $14.48

4. Selling price = Total manufacturing cost + Markup = $869 + ( 110% * $869 ) = $1,825

Note : As the information regarding rounding off is not available, the rates and per unit amounts are rounded off to two decimal places and any other amounts are rounded off to the nearest dollar.