Landen Corporation uses a job-order costing system. At the beginning of the year, the company made...

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Landen Corporation uses a job-order costing system. At the beginning of the year, the company made...

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		65,000
Machine-hours required to support estimated production		32,500
Fixed manufacturing overhead cost	$	195,000
Variable manufacturing overhead cost per direct labor-hour	$	1.20
Variable manufacturing overhead cost per machine-hour	$	2.40

During the year, Job 550 was started and completed. The following information is available with respect to this job:


Direct materials	$	250
Direct labor cost	$	318
Direct labor-hours		15
Machine-hours		5

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 Landen’s 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:

a.Predetermined overhead rate___per DLH

b.Total manufacturing cost of Job 550

c.Selling price

2.Machine-hours:

a.Predetermined overhead rate___per MH

b.Total manufacturing cost of Job 550

c.Selling price

business accounting

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Answer 1

Answer #1

1. Direct labor hours:

Predetermined overhead rate = $195,000/65,000 + $1.20 = $4.2

Total manufacturing cost of Job 550:

Direct material	$250
Direct labor	318
Overhead applied (15*$4.2)	63
Total manufacturing cost	$631

Selling price = $631 + 1,262 (631*200%) = $1,893

2. Machine hours:

Predetermined overhead rate = $195,000/32,500 + $2.40 = $8.4

Total manufacturing cost of Job 550:

Direct material	$250
Direct labor	318
Overhead applied (5*$8.4)	42
Total manufacturing cost	$610

Selling price = $610 + 1,220 (610*200%) = $1,830

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Answer 2

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