Question

Chapter 2 Homework i Help Save Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing (LO2-1, LO2-2, LO2) 20 points Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimat eBook Direct labor-hours required to support estimated production Machine-hours required to support estimated production Pixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 160,000 80,000 $480,000 $ 5.00 $ 10.00 Print References 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 Required: 1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation 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: < Prev 4 of 6 !!! Next >

Answer 1

Requirement 1 Compute a plantwide predetermined overhead rate with direct labor-hours as the allocation base: Variable manufacturing overhead rate per hour = $5 Fixed manufacturing overhead cost = 5480.000 = 160.000 = $3 Predetrmined overhead rate = $5 + $3 = $8 b) Compute the total manufacturing cost of Job 550 as follows: Direct Material Direct Labor-cost Manufacturing overheads (15 hrs $8) Total Amount $240 $233 $120 $593

Compute selling price. If Landen uses a markup percentage of 200% of its total manufacturing cost as follows: Selling Price=Manufacturing cost +(Manufacturing cost 200%) = $593+($593x200%) =$593+$1.186 = $1,779 Requirement 2 Compute predetermined overhead rate (Machine hour basis) Variable manufacturing overhead rate per machine hour = $10 Fixed manufacturing overhead cost rate = $480.000 - 80.000 = $6 Predetrmined overhead rate = $10+ $6 = $16 b)

Compute the total manufacturing cost of Job 550 as follows: Direct Material Direct Labor-cost Manufacturing overheads (5 hrs Total Amount $240 $233 $80 $553 $16) Compute selling price. If Landen uses a markup percentage of 200% of its total manufacturing cost as follows: Selling Price=Manufacturing cost +(Manufacturing cost 200%) = $553+($553x200%) = $553 +$1.106 = $1,659