Question

Comans Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Milling Customizing Machine-hours 28,000 15,000 Direct labor-hours 15,000 9,000 Total fixed manufacturing overhead cost $ 154,000 $ 36,900 Variable manufacturing overhead per machine-hour $ 1.70 Variable manufacturing overhead per direct labor-hour $ 3.20 During the current month the company started and finished Job A319. The following data were recorded for this job: Job A319: Milling Customizing Machine-hours 30 30 Direct labor-hours 60 50 Direct materials $ 560 $ 210 Direct labor cost $ 640 $ 630 If the company marks up its manufacturing costs by 20% then the selling price for Job A319 would be closest to: (Round your intermediate calculations to 2 decimal places.) Noreen 5e Recheck

Answer 1

Predetermined overhead rate = Estimated manufacturing overhead / Machine hours or Direct labor hours

Milling Department = $1.70 + $5.5 (154,000 / 28,000) = $7.2 per machine hours

Customizing Department = $3.20 + $4.1 (36,900 / 9,000) = $7.3 per direct labor hour

Job A319	Total	Milling	Customizing
Direct material	$770	$560	$210
Direct labor cost	1,270	640	630
Manufacturing overhead	581	216 (30*$7.2)	365 (50*$7.3)
Total manufacturing cost	2,621	1,416	1,205
Mark up 20%	524.2	283.2	241
Selling price	$3,145.2	$1,699.2	$1,446

Selling price for Job A319 would be closets to $3,145.2