Question

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 available with respect to this job: Direct materials Direct labor cost Direct labor-hours Machine-hours $175 $ 225 15 5 equired: Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation be nder this approach: Compute the plantwide predetermined overhead Yate. . Compute the total manufacturing cost of Job 550. 5. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550 Assume that Landen's controller believes that machine-hours is a better allocation base than direct labor-hours. Under this proach: Compute the plantwide predetermined overhead rate. Compute the total manufacturing cost of Job 550. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 5503 und your intermediate calculations to 2 decimal places. Round your predetermined Overhead Rate answers to 2 decimal ces and all other answers to the nearest whole dollar.)

Answer 1

1
a	Fixed manufacturing overhead cost	$784,000
	Variable manufacturing overhead cost (70,000 x $4.00)	$280,000
	Total Manufacturing Overhead costs	$1,064,000
	Divided by Machine hours	70,000
		$15.20	per machine hour
b.	Direct materials	$175
	Direct labor cost	$225
	Manufacturing overhead (5 x $15.20)	$76
	Total manufacturing cost	$476
c.	Total manufacturing cost	$476
	Add: Markup	$476
	Selling Price	$952
2
a.	Fixed manufacturing overhead cost	$784,000
	Variable manufacturing overhead cost (140,000 x $4.00)	$560,000
	Total Manufacturing Overhead costs	$1,344,000
	Divided by Labor hours	140,000
		$9.60	per direct labor hour
b.	Direct materials	$175
	Direct labor cost	$225
	Manufacturing overhead (15 x $9.60)	$144
	Total manufacturing cost	$544
c.	Total manufacturing cost	$544
	Add: Markup	$544
	Selling Price	$1,088