Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3]
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 | 150,000 | |
Machine-hours required to support estimated production | 75,000 | |
Fixed manufacturing overhead cost | $ | 420,000 |
Variable manufacturing overhead cost per direct labor-hour | $ | 4.60 |
Variable manufacturing overhead cost per machine-hour | $ | 9.20 |
During the year, Job 550 was started and completed. The following information is available with respect to this job:
Direct materials | $ | 195 |
Direct labor cost | $ | 288 |
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.)
Answer: | |
1) | |
(a) | |
Plantwide Predetermined Overhead
rate = (Estimated Fixed Manf. Overhead Cost /Est. DLHs ) + Variable Manf. overhead Cost per DLH = ( $ $ 420,000 / $ 150,000 ) + $ 4.60 = $ 2.8 + $ 4.60 |
$ 7.40 per DLH |
(b) | |
Particulars | Amount (in $ ) |
Direct materials | $ 195 |
Direct labor Cost | $ 288 |
Overhead applied ( $ 7.40 x 15 DLHs ) |
$ 111 |
Total Manufacturing cost | $ 594 |
Add: Mark up @ 200% | $ 1,188 |
Selling Price for Job 550 | $ 1,782 |
2) | |
(a) | |
Plantwide Predetermined Overhead
rate = (Estimated Fixed Manf. Overhead Cost /Est. MHs ) + Variable Manf. overhead Cost per MH = ( $ 420,000 / $ 75,000 ) + $ 9.20 = $ 5.60 + $ 9.20 |
$ 14.80 per MH |
(b) | |
Particulars | Amount (in $ ) |
Direct materials | $ 195 |
Direct labor Cost | $ 288 |
Overhead applied ( $ 14.80 x 5 MHs ) |
$ 74 |
Total Manufacturing cost | $ 557 |
Add: Mark up @ 200% | $ 1,114 |
Selling Price for Job 550 | $ 1,671 |
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3] Landen Corporation uses a job-order costing...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3] 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 140,000 Machine-hours required to support estimated production 70,000 Fixed manufacturing overhead cost $ 784,000 Variable manufacturing overhead cost per direct labor-hour $ 2.00 Variable manufacturing overhead cost per machine-hour $ 4.00 During the year, Job 550 was started and completed. The following information is...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2-3) 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 80,000 40,000 $240.000 $ 1.80 $ 3.60 During the year, Job 550 was started and completed. The following information is available...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3] 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 60,000 30,000 $180,000 $ 1.00 $ 2.00 During the year, Job 550 was started and completed. The following information is available...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2-3] Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: hours required to support estimated production Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 120,000 60,000 $336,000 $ 3.60 $ 7.20 During the year, Job 550 was started and completed. The following information is available with...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3] 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 80,000 40,000 $ 240,000 $ 1.80 $ 3.60 During the year, Job 550 was started and completed. The following information is...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2-3) 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 Machine-hours required to support estimated production Fixed Manufacturing overhead cost Variable manufacturing overhead cont per direct labor-hour Variable manufacturing overhead cost per machine-hour 95,000 47,500 $266,000 $ 2.60 $ 5.20 During the year, Job 550 was started and completed. The following information is available...
Problem 2-16 (Static) Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2-3] 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 140,000 70,000 $784,000 $ 2.00 $ 4.00 During the year, Job 550 was started and completed. The following information is...
Problem 2-16 (Static) Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3] 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 140,000 70,000 $ 784,000 $ 2.00 $ 4.00 During the year, Job 550 was started and completed. The following information...
Problem 2-16 (Static) Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2-3] 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 140,000 70,000 $784,000 $ 2.00 $ 4.00 During the year, Job 550 was started and completed. The following information is...
Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing (L02-1, LO2-2, LO2-3) 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 Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 1 40,000 70,000 $784, eee $ 2.00 $ 4.00 During the year, Job 550 was started and completed. The following information...