Question

Exercise 2-12 Computing Predetermined Overhead Rates and Job Costs [LO2-1, LO2-2, LO2-3]

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		151,000
Fixed manufacturing overhead cost	$	650,000
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	$	390
Direct labor cost	$	210
Machine-hours used		30

Compute the total manufacturing cost assigned to Job 400.

3. If Job 400 includes 60 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

Solution: 1
	CACLULATION OF OVERHEAD APPLICATION RATE PER MACHINE HOURS
	Overhead Application Rate =	Budgeted Fixed Manufacturing Overhead Cost	"/"	Budgeted Machine Hours	"="	Estimated Overhead rate PER Machine Hrs
	Overhead Application Rate =	$                       650,000	"/"	151,000	"="	$                       4.30
Solution: 2
	CALCULATION OF TOTAL MANUFACTURING COST ASSIGNED TO JOB 400
		Job - 400
	Direct Materials	$                               390
	Direct Labor Cost	$                               210
	Fixed Manufacturing overhead	$                               129
		(30 Hours X $ 4.30)
	Total Manufacturing cost assigned to Job 400	$                               729
Solution: 3
	CALCULATION OF COST PER UNIT FOR JOB 400
	Total Manufacturing cost assigned to Job 400	$                               729
	Divide by	"/" By
	No. of Units Produced	60	Units
	Cost Per Unit	$                           12.15
	Answer = $ 12.15 Per Unit
Solution: 4
	Calculation of Selling Price Per Unit
	Manufacturing Cost	$                         729.00
	Add: Mark-up 120% of Total Cost	$                         874.80
	Total Sales Value	$                     1,603.80
	Divide by	"/" By
	No. of Units Produced	60	Units
	Selling Price Per unit	$                           26.73
	Answer = Selling Price Per Unit = $ 26.73