Question

Comans Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Machine-hours Direct labor-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Milling 20,000 9,000 $70,000 $ 1.70 Customizing 20,000 10,000 $38,000 $ 4.60 During the current month the company started and finished Job A319. The following data were recorded for this job: Job A319: Machine-hours Direct labor-hours Direct materials Direct labor cost Milling 50 60 $ 590 $ 690 Customizing 10 40 $ 160 $ 480 If the company marks up its manufacturing costs by 20% then the selling price for Job A319 would be closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

	Computation of cost and selling price of Job A319
	Direct Materials	$    750.00	($ 590 + $ 160)
	Direct Labor	$ 1,170.00	($ 690 + $ 480)
	Manufacturing OH:
	Milling		$    260.00	($ 5.20 x 50)
	Customizing	$    336.00	($ 8.40 x 40)
	Total cost		$ 2,516.00
Add:	Markup @ 20%	$ 503.20
	Selling price	$ 3,019.20

Workings:

Computation of departmental overhead rate
Particulars		Milling	Customizing
Fixed manufacturing cost	$ 70,000.00	$ 38,000.00
Machine hours		20000
Direct Labor hours			10000
Fixed manufacturing cost per hour	$           3.50	$           3.80
Variable manufacturing cost per hour	$           1.70	$           4.60
Departmental overhead rates	$           5.20	$           8.40

Please let me know if you find anything incorrect. Thank you