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 157,000 $ 655,000 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 Direct labor cost Machine-hours used $ 380 $ 270 38 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 120% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Answer 1

1.

Predetermined overhead rate = Variable overhead cost per machine hour + Fixed manufacturing overhead cost/Estimated machine hours

= 4.80 + 655,000/157,000

= 4.80 + 4.17

= $8.97 per machine hour

2.

Overhead applied = Actual machine hours used x  Predetermined overhead rate

= 38 x 8.97

= $341 (rounded to nearest whole dollar)

Job cost sheet

Direct material	380
Direct labor	270
Overhead applied	341
Total manufacturing cost	$991

3.

Unit product cost = Total manufacturing cost/Number of units

= 991/50

= $19.82

4.

Markup percentage = 120% of total job cost

Mark up = 990.86 x 120%

= $1,189

Total sales value of job 400 = Total cost assigned to job 400 + Mark up

= 991 + 1,189

= $2,180

Selling price per unit = Total sales value of job 400/Number of units

= 2,180/50

= $43.6

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