In: Accounting
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Molding | Fabrication | Total | |||||||
Estimated total machine-hours used | 2,500 | 1,500 | 4,000 | ||||||
Estimated total fixed manufacturing overhead | $ | 14,500 | $ | 17,700 | $ | 32,200 | |||
Estimated variable manufacturing overhead per machine-hour | $ | 3.20 | $ | 4.00 | |||||
Job P | Job Q | |||||
Direct materials | $ | 31,000 | $ | 17,000 | ||
Direct labor cost | $ | 35,400 | $ | 14,700 | ||
Actual machine-hours used: | ||||||
Molding | 3,500 | 2,600 | ||||
Fabrication | 2,400 | 2,700 | ||||
Total | 5,900 | 5,300 | ||||
Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.
Assume that Sweeten Company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments and Job P included 20 units and Job Q included 30 units.
Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis
First we calculate, unit product cost for Job P and Job Q.
Job P | Job Q | |
Direct materials | $31,000 | $17,000 |
Direct labor | $35,400 | $14,700 |
Manufacturing overhead costs - Molding | $31,500 ($9 × 3,500) | $23,400 ($9 × 2,600) |
Manufacturing overhead costs - Fabrication | $37,920 ($15.80 × 2400) | $42,660 ($15.80 × 2700) |
Total manufacturing overhead costs assigned (a) | $135,820 | $97,760 |
Number of units (b) | 20 | 30 |
Unit product cost (a) ÷ (b) | $6,791 | $3,259 |
Calculations of departmental overhead rate per machine hour:
Molding | Fabrication | |
Fixed manufacturing overhead costs (a) | $14,500 | $17,700 |
Total machine hours (b) | 2500 | 2500 |
Fixed manufacturing overhead rate per machine hour (c = a ÷ b) | $5.80 | $11.80 |
Add: variable overheads rate per hour | $3.20 | $4.00 |
Total Departmental overhead rate per machine hour | $9.00 | $15.80 |
Job P | Job Q | |
Unit product cost | $6,791 | $3,259 |
Markup price | 80% | 80% |
Selling price per unit | $12,223.80 ($6,791 × 180%) | $5,866.20 ($3,259 × 180%) |
Total price for job | $244,476 ($12,223.80 × 20 units) | $175,980 ($5,866. × 30 units) |