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Landen Corporation uses a job-order costing system. At the beginning of the year, the company made...

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		80,000
Machine-hours required to support estimated production		40,000
Fixed manufacturing overhead cost	$	240,000
Variable manufacturing overhead cost per direct labor-hour	$	1.80
Variable manufacturing overhead cost per machine-hour	$	3.60

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


Direct materials	$	207
Direct labor cost	$	257
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.)

Solutions

Expert Solution

Solution :

1.	Direct Labor Hours
a.	Predetermined OH rate	$ 4.80
b.	Total Manufacturing Cost of Job 550	$ 536
c.	Selling Price	$ 1,608
2.	Machine Hours
a.	Predetermined OH rate	$ 9.60
b.	Total Manufacturing Cost of Job 550	$ 512
c.	Selling Price	$ 1,536

Working :

1. Direct Labor Hours

(a) Plantwide Predetermined Overhead Rate based on Labor Hours :

Plantwide Predetermined Overhead Rate = Fixed OH per direct labor + Variable OH labor Hour

= ($ 240,000 / 80,000) + $ 1.80

= $ 4.80

(b) Manufacturing Cost of Job 550

Direct Material	$ 207
Direct Labor Cost	$ 257
Manufacturing OH (15 * $ 4.80)	$ 72
Total Manufacturing Cost	$ 536

(a) Total Manufacturing Cost	$ 536
(b) Markup (200% * a )	$ 1,072
(c) Selling Price (a + b)	$ 1,608

2. Machine Hours

(a) Plantwide Predetermined Overhead Rate based on Machine Hours :

Plantwide Predetermined Overhead Rate = Fixed OH per Machie Hour + Variable OH per Machine Hour

= ($ 240,000 / 40,000) + $ 3.60

= $ 9.60

(b) Manufacturing Cost of Job 550

Direct Material	$ 207
Direct Labor Cost	$ 257
Manufacturing OH (5 * $ 9.60)	$ 48
Total Manufacturing Cost	$ 512

(a) Total Manufacturing Cost	$ 512
(b) Markup (200% * a )	$ 1,024
(c) Selling Price (a + b)	$ 1,536

Please vote up and write your doubts in comment section. Would be glad to help you further.

ekkarill92 answered 1 year ago

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