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		154,000
Fixed manufacturing overhead cost	$	655,000
Variable manufacturing overhead cost per machine-hour	$	4.50

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	$	310
Direct labor cost	$	290
Machine-hours used		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

Part - 1:

Computation the predetermined overhead rate is:

Predetermined overhead rate = Fixed manufacturing cost of overhead per hour + Variable manufacturing cost of overhead per hour

= $4.25 + $4.50

= $8.75

Hence, the predetermined overhead rate is $8.75

Working note:

Computation the fixed manufacturing cost of overhead per hour is:

Fixed manufacturing cost of overhead per hour = Fixed manufacturing cost of overhead / Number of machine hours

= $655,000 / 154,000

= $4.25

Hence, the fixed manufacturing cost of overhead per hour is $4.25

Part - 2:

Computation the total manufacturing cost is:

Total manufacturing cost = Cost of direct material + Cost of direct labor + Cost of overhead

= $310 + $290 + $332.50

= $932.50

Hence, the total manufacturing cost is $932.50

Working note:

Computation the cost of overhead is:

Cost of overhead = Number of hours used * Predetermined overhead rate

= 38 * $8.75

= $332.50

Hence, the cost of overhead is $332.50

Part - 3:

Computation the unit product cost is:

Unit product cost = Total manufacturing cost / Number of units

= $932.50 / 50

= $18.65

Hence, the unit product cost is $18.65

Part - 4:

Computation the selling price of each unit is:

Selling price per unit = Unit product cost + Increase in unit product cost

= $18.65 + $22.38

= $41.03

Hence, the selling price per unit is $41.03

Working note:

Computation the increase in unit product cost is:

Increase in unit product cost = Unit product cost * Increased percent of cost

= $18.65 * 120%

= $22.38

Hence, the increase in unit product cost is $22.38