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 Fixed manufacturing overhead cost Variable manufacturing overhead cost per machine-hour 158,000 $ 652,000 4.90 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 $ 300 $ 200 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 130% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Answer 1

1..
Answer:
The Overheads absorption rate is determined by summing up fixed overheads rate per machine hour and variable overheads rate per machine hour.
The Variable overheads rate is given as $ 4.90 per machine hour.
However, to compute the fixed overheads rate per machine hour, the total fixed overheads estimated in the begining of the year is divided by total estimated machine hour in the beginning of the year.
Computation of predetermined Overhead rate :
Variable overhead rate per machine hour $		4.9
Fixed Overheads rate per machine hour $:
Total fixed manufacturing overheads	$652,000
Divide: Total labour cost	$150,000
Fixed Overheads rate par labour $		4.346667
Total Ovetheads rate per machine hour		9.246667
2..
Answer:
Now the job400 cost is computed by adding the material cost, labour cost used in the job and overheads.
Computation of total job cost :
Total job cost:
Direct material	$300
Direct labour	$200
Overhead applied (31 hours*9.2467)	$287
Total job cost	$787
Working note:
Overhead applied in jobs:
Machine hours incurred in job	$31
Overhead rate per machine hour	9.2467
Overhead applied in job	$287
3..
The unit product cost of Job 400 is computed as follows:
Total Manufacturing cost (a)	$787
Number of unit in the job (b)	60
Unit product cost (a)/(b)	13.117
4..
The selling price per unit is computed as follows:
Total manufacturing cost	$787
Markup (130% of manufacturing cost)	1023
Selling price for Job 400 (a)	1810
Number of units in Job 400(b)	50