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 159,000 657,000 4.50 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 $ 310 $ 230 Compute the total manufacturing cost assigned to Job 400. 3. If Job 400 includes 50 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. Plantwide predetermined overhead rate = [ Estimated total fixed manufacturing overhead cost / Estimated total machine hours ] + Estimated variable manufacturing overhead cost per machine hour = [ $657,000 / 159,000 machine hours ] + $4.50 = $4.13 + $4.50 = $8.63 per MH

2. Job 400 :

Direct materials	$310
Direct labor	$230
Manufacturing Overhead [ 33 machine hours * $8.63 ]	$284.79
Total manufacturing cost ( Rounded off to nearest dollar )	$825

3. Unit product cost = Total manufacturing cost / Number of units = $825 / 50 units = $16.5

4. Selling price = Total manufacturing cost + markup = $825 + ( 130% * $825 ) = $1,898