. Advertisement .
..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 | 140,000 |
| Machine-hours required to support estimated production | 70,000 |
| Fixed manufacturing overhead cost | $ 784,000 |
| Variable manufacturing overhead cost per direct labor-hour | $ 2.00 |
| Variable manufacturing overhead cost per machine-hour | $ 4.00 |
During the year, Job 550 was started and completed. The following information is available with respect to this job:
| Direct materials | $ 175 |
| Direct labor cost | $ 225 |
| 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 Landon 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.)
| 1. | Direct labor-hours: | ||
| a. | Predetermined overhead rate | per DLH | |
| b. | Total manufacturing cost of Job 550 | ||
| c. | Selling price | ||
| 2. | Machine hours: | ||
| a. | Predetermined overheadd rate | per MH | |
| b. | Total manufacturing cost of Job 550 | ||
| c. | Selling price |
♦ Relevant knowledge
. Advertisement .
..4..
The predetermined overhead rate for the entire plant is utilized in job order cost systems to assign overhead costs to the projects that are in progress. It is determined by the cost of overhead and the overhead driver units estimated.
Solution: