Question

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		65,000
Machine-hours required to support estimated production		32,500
Fixed manufacturing overhead cost	$	195,000
Variable manufacturing overhead cost per direct labor-hour	$	1.20
Variable manufacturing overhead cost per machine-hour	$	2.40

During the year, Job 550 was started and completed. The following information is available with respect to this job:

Direct materials	$	250
Direct labor cost	$	318
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 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:

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.)

Answer 1

Solution:

** Please feel free to ask me if any more explanations are required. Please hit the thumbs up button.

Thank You..!!