Question

Jin Manufacturing prices its products at full cost plus 30.0%. The company operates two support depts (A, B) and two production depts (C, D). The cost driver in Dept A is service hours, and the cost driver in Dept B is number of employees. The cost driver in Dept C is direct labor hours and the cost driver in Dept D is machine hours. One of the company's products requires 4 direct labor hours per unit in Dept C and no time in Dept D. Direct materials for the product cost $180.00 per unit, and direct labor is $80.00 per unit. What is the selling price of the product?
   
A
B
C
D
Directly-traced  
$40,000
$100,000
$180,000
$240,000
Service hours  
1,000
1,200
2,000
6,000
Number of employees  
20
30
60
40
Direct labor hours  
-
-
10,000
6,400
Machine hours  
-
-
6,000
10,800
               

Answer 1

Selling price would be calculated as follows: -

Producing Dept C

Overhead costs                                                           $ 180,000

Dept A [$40,000 × (2,000/8,000)]                              10,000

Dept. B [$100,000 × (60/100)]                                   60,000

$250,000

Predetermined overhead rate ($250,000/10,000)       $25 per DLH

Product selling price:

Direct materials                                                           $ 180.00

Direct labor                                                                 80.00

Overhead ($25 × 4 DLH)                                           100.00

Cost per unit                                                               $360.00

Selling price ($360*130%) = $468.00