Question
In: Accounting
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 |
(c) Selling Price of Job 550 :
| (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 |
(c) Selling Price of Job 550 :
| (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 2 years agoRelated Solutions
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