Question

In: Accounting

Sweeten Company had no jobs in progress at the beginning ofMarch and no beginning inventories....

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):


MoldingFabricationTotal
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 PJob 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

Solutions

Expert Solution

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)

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