Question

Kluth Corporation has two manufacturing departments--Molding and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Estimated total machine-hours (MHS) Estimated total fixed manufacturing overhead cost Estimated variable manufacturing overhead cost per MH Molding Customizing 7,000 3,400 $ 18,200 $8,500 $ 1.50 $ 3.00 Total 10,400 $26,700 During the most recent month, the company started and completed two jobs--Job C and Job M. There were no beginning inventories. Data concerning those two jobs follow: Direct materials Direct labor cost Molding machine-hours Customizing machine-hours Job C Job M $16,500 $ 9,800 $23,200 $10,200 1,250 5,750 2,900 500 Required: Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling prices for Job C and for Job M. (Do not round intermediate calculations.) Selling price for Job C Selling price for Job M

Answer 1

Selling price for Job c           [Refer working note 1]	$72,930
Selling price for Job M          [Refer working note 1]	$55,590

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Workking note 1 - Computation of selling price
	Job C	Job M
Direct materials                                                            (a)	$16,500	$9,800
Direct labor cost                                                           (b)	$23,200	$10,200
Overhead cost allocated   [Refer working note 2]        (c)	$21,075	$26,325
Total manufacturing cost                                                (d = a + b + c)	$60,775	$46,325
Add: Mark up @ 20%                                                    (e = d x 20%)	$12,155	$9,265
Selling price                                                                    (d + e)	$72,930	$55,590

Working note 2 - Computation of amount of manufacturing overhead allocated
	Job C	Job M
Molding department:
Departmental overhead rate for Molding department   [Refer working note 3]                     (a)	$4.10	$4.10
Molding machine hours used                                                                                                  (b)	1,250	5,750
Amount of Molding department's overhead allocated                                                              (c = a x b)	$5,125	$23,575
Customization department:
Departmental overhead rate for Customization department   [Refer working note 3]            (d)	$5.50	$5.50
Customization machine hours used                                                                                        (e)	2,900	500
Amount of Molding department's overhead allocated                                                              (f = d x e)	$15,950	$2,750
Total overhead allocated                                                                                                          (c + f)	$21,075	$26,325

Working note 3 - Computation of departmental overhead rates
	Molding	Customization
Estimated total fixed manufacturing overhead cost                               (a)	$18,200	$8,500
Estimated number of machine hours                                                       (b)	7,000	3,400
Estimated fixed manufacturing overhead cost per Machine hour          (c = a / b)	$2.60	$2.50
Estimated variable manufacturing overhead cost per Machine hour       (d)	$1.50	$3.00
Departmental overhead rate                                                                 (c + d)	$4.10	$5.50