Question

Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:

Total machine-hours		32,300
Total fixed manufacturing overhead cost	$	581,400
Variable manufacturing overhead per machine-hour	$	2.00

Recently, Job T687 was completed with the following characteristics:

Number of units in the job		10
Total machine-hours		40
Direct materials	$	630
Direct labor cost	$	1,260

If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:

Answer 1

Total variable overhead estimated=(32300*2)=$64600

Total overhead estimated=Total variable overhead estimated+Total fixed overhead estimated

=64600+581400

=$646000

Predetermined overhead rate=Total overhead estimated/Estimated machine hours

=646000/32300

=$20 per machine hour

Applied overhead=Predetermined overhead rate*Actual machine hours

=(20*40)=$800

Hence total cost=Direct materials+Direct labor+Overhead

=(630+1260+800)=$2690

Hence cost per unit=2690/10

=$269

Hence selling price=cost per unit*140%

=$269*140%

=$376.6