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Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3] Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates Direct labor-hours required to support estimated production Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 60,000 30,000 $180,000 $ 1.00 $ 2.00 During the year, Job 550 was started and completed. The following information is available with respect to this job Direct materials Direct labor cost Direct labor-hours Machine-hours $ 213 $ 323 Required: 1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base Under this approach: a. Compute the plantwide predetermined overhead rate b. Compute the total manufacturing cost of Job 550 c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? 2. Assume that Landens controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach a. Compute the plantwide predetermined overhead rate b. Compute the total manufacturing cost of Job 550 c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar.) 1. Direct labor-hours Predetermined overhead rate Total manufacturing cost of Job 550 Selling price per DLH 2. Machine-hours Predetermined overhead rate Total manufacturing cost of Job 550 Selling price per MH

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Plantwide Overhead Rate Per Labour Hour Fixed Manufacturing Overhead Labour Hours Fixed Manufacturing Overhead Rate (a/b) Variable Overhead Per Labour Hour Plantwide Labour Hour (c+d) $180000 60000 Hrs $3 per hr $1 per hr $4 per hr Manufacturing Cost for JOB 550 Direct Material Direct Labour Variable Overhead ($115 hrs) Fixed Overhead ($3 15 hrs) Total $213 $323 $15 $45 $596 Selling Price of Job 550 Manufacturing Cost Add : Mark Up ($596 *20096) Selling Price $596 $1192 $1788

Plantwide Overhead Rate Per Machine Hour Fixed Manufacturing Overhead Machiine Hours Fixed Manufacturing Overhead Rate (a/b) Variable Overhead Per Labour Hour Plantwide Labour Hour (c+d) $180000 30000 Hrs $6 per hr $2 per hr $8 per hr Manufacturing Cost for JOB 550 Direct Material Direct Labour Variable Overhead ($2*5 hrs) Fixed Overhead ($8*5 hrs) Total $213 $323 $10 $40 $586 Selling Price of Job 550 Manufacturing Cost Add : Mark Up ($596 *200%) Selling Price $586 $1172 $1758

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