Question

Kluth Corporation has two manufacturing departments--Molding and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Molding		Customizing		Total
Estimated total machine-hours (MHs)		6,000		2,300		8,300
Estimated total fixed manufacturing overhead cost	$	15,000	$	8,740	$	23,740
Estimated variable manufacturing overhead cost per MH	$	2.50	$	2.00

During the most recent month, the company started and completed two jobs--Job C and Job M. There were no beginning inventories. Data concerning those two jobs follow:

	Job C		Job M
Direct materials	$	15,100	$	8,800
Direct labor cost	$	22,000	$	9,000
Molding machine-hours		2,700		3,300
Customizing machine-hours		1,700		600

Required:

Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling prices for Job C and for Job M. (Do not round intermediate calculations.)

	Selling price for Job C Selling price for Job M

Answer 1

• Requirement with working

	Job C	Job M
Direct Material	$15,100	$8,800
Direct Labor	$22,000	$9,000
Overhead applied:
Molding [machine hours x $ 5.00*]	$13,500	$16,500
Customizing [machine hours x $ 5.80*]	$9,860	$3,480
Total manufacturing Cost	$60,460	$37,780
Markup 20%	$12,092	$7,556
Selling Price = Answer	$72,552 Answer	$45,336 Answer

>* Working

Working		Molding	Customizing
A	Total Fixed Overheads	$                                                15,000	$                                                               8,740
B	Total machine hours	6,000	2,300
C = A/B	Fixed overhead rate	$                                                     2.50	$                                                                  3.80
D	Variable Overhead rate	$                                                     2.50	$                                                                  2.00
E = C+D	Predetermined Departmental Overhead rates	$                                                    5.00	$                                                                  5.80