Question

Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine- hour 31,000 $310,000 $ 4.00 Recently, Job T587 was completed with the following characteristics: 10 Number of units in the job Total machine-hours Direct materials Direct labor cost 30 $ 730 $1,460 The total job cost for Job T687 is closest to:

Answer 1

Requirement 1:- Calculation of overhead rates Fixed manufacturing overhead rate = Fixed overhead/Number of machine hours hour Variable manufacturing overhead per machine-hour = $ 4 per machine hour Predetermind overhead rate = $ 14 per machine hour Working for cost of production Direct materials Direct labor cost Prime cost Variable manufacturing overhead Fixed manufacturing overhead Total cost Job 1687 730 1460 2190 (30*4) = 120 (30*10) = 300 2610

Requirement: -2 Calculation of overhead rates Fixed manufacturing overhead rate (Milling department) = Fixed overhead/Number of machine hours = $(68000/20000) $3.4 per machine hour Fixed manufacturing overhead rate (Customizing department) = Fixed overhead/Number of labor hours = $(36000 / 8000) = $4.5 per machine hour Variable manufacturing overhead per machine-hour = $ 1.90 Variable manufacturing overhead per direct labor-hour = $ 3.8 Calculation of selling price for Job A319 Milling department Customizing department Total Direct materials 750 250 1000 Direct labor cost 450 750 1200 Prime cost 1200 1000 2200 Variable manufacturing overhead (70*1.9) = 133 (60*3.8) = 228 361 Fixed manufacturing overhead (70*3.4) = 238 (60*4.5) = 270 508 Total cost 3069 Mark up (3069 x 20%) 614 Selling price 3683

Requirement:- 3 Predetermined Overhead rate = Estimated manufacturing overhead / Estimated total labor hours [1292940 + (49500*5.35)] / 49500 = 1557765 / 49500 = 31.47 per direct labor hour

Requirement: -4 Here the overhead cost is 80% of direct labour cost Manufacturing Cost = $ 20560 (80% of direct material) = 20560/80*100 25700 The option a is correct $ 25,700

Requirement :-5 Calculation of overhead rates Fixed manufacturing overhead rate = Fixed overhead/Number of machine hours =406600/107000 = $ 3.8 per labour hour Variable manufacturing overhead per machine-hour = $ 5 perlabour hour Predetermind overhead rate = $ 8.8 per labour hour Working for cost of production Direct materials Direct labor cost Prime cost Variable manufacturing overhead Fixed manufacturing overhead Total cost Unit Unit product cost Job P951 800 10700 11500 (100*5) = 500 (100*3.8) = 380 12380 100 123.8

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