Question

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		125,000
Machine-hours required to support estimated production		62,500
Fixed manufacturing overhead cost	$	350,000
Variable manufacturing overhead cost per direct labor-hour	$	3.80
Variable manufacturing overhead cost per machine-hour	$	7.60

During the year, Job 550 was started and completed. The following information is available with respect to this job:

Direct materials	$	201
Direct labor cost	$	240
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

Part-1
.Plantwide Overhead Rate based on Labour Hour
Direct Labour Hour	125000
Fixed manufacturing Overhead Cost	350000
Fixed Overhead Rate ( Fixed Manufacturing Overhead Cost/ Direct Labour Hour) (a)	2.8
Variable Manufacturing Overhead Rate per Labour Hour (b)	3.8
Plantwide Overhead Rate (a+b)	6.6
Computation of tototal Manufacturing Cost - Job550-Landen Corporation
Particulars	Amount
Direct mAterial	$201.00
Direct Labour	$240.00
Applied Overhead (15 HourX $6.6)	$99.00
Tototal Manufacturing Cost	$540.00
Computation of Selling Price
Particulars	Amount in $
Tototal Manufacturing Cost	$540.00
Markup @ 200%	$1,080.00
Selling Price	$1,620.00

Part-2
.Plantwide Overhead Rate based on Machine Hour
Direct Machine Hour	62500
Fixed manufacturing Overhead Cost	350000
Fixed Overhead Rate ( Fixed Manufacturing Overhead Cost/ Machine Hour) (a)	5.6
Variable Manufacturing Overhead Rate per Machine Hour (b)	7.6
Plantwide Overhead Rate (a+b)	13.2
Computation of tototal Manufacturing Cost - Job550-Landen Corporation
Particulars	Amount
Direct mAterial	$201.00
Direct Labour	$240.00
Applied Overhead (5HourX $13.20)	$66.00
Tototal Manufacturing Cost	$507.00
Computation of Selling Price
Particulars	Amount in $
Tototal Manufacturing Cost	$507.00
Markup @ 200%	$1,014.00
Selling Price	$1,521.00

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