Question

Kluth Corporation has two manufacturing departments --Molding and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Estimated total machine-hours (MS) Estimated total fixed manufacturing overhead coat Estimated variable manufacturing overhead cost per MH. Molding Customizing Total 14,000 2,900 16,900 $35,000 $8,990 $43,990 $ 2.00 $ 6.00 During the most recent month, the company started and completed two jobs-Job C and Job M. There were no beginning inventories. Data concerning those two jobs follow: Direct materials Direct labor coat Molding machine-hours Customizing machine-hours Job C $16,000 $22,700 1,250 2,400 Job M $ 9.400 $ 9,700 12.750 500 Required: Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling prices for Job C and for Job M. (Do not round Intermediate calculations.) Selling price for Job C Selling price for Job M

Answer 1

Overhead per hour:

Molding = ($35,000 / 14,000) + $2 = $4.50

Customizing = ($8,990 / 2,900) + $6 = $9.10

	Job C	Job M
Direct materials	$16,000	$9,400
Direct labor cost	$22,700	$9,700
Molding cost (1,250 X $4.50) (12,750 X $4.50)	$5,625	$57,375
Customizing cost (2,400 X $9.10) (500 X $9.10)	$21,840	$4,550
Total cost	$66,165	$81,025
Profit (20% of total cost)	13,233	$16,205
Selling price	$79,398	$97,230