Question

Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production		156,000
Fixed manufacturing overhead cost	$	658,000
Variable manufacturing overhead cost per machine-hour	$	4.40

Required:

1. Compute the plantwide predetermined overhead rate.

2. During the year, Job 400 was started and completed. The following information was available with respect to this job:

Direct materials	$	320
Direct labor cost	$	230
Machine-hours used		33

Compute the total manufacturing cost assigned to Job 400.

3. If Job 400 includes 50 units, what is the unit product cost for this job?

4. If Moody uses a markup percentage of 130% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Answer 1

Requirement 1:-

The plantwide predetermined overhead rate can be calculated as follows:-

Particulars	Amount
Machine hours required to support estimated production	1,56,000
Fixed manufacturing overheadcost	6,58,000
Fixed overhead rate	4.22
Variable manufacturing overhead rate	4.40
Plantwide overhead rate per hour	8.62

Requirement 2:-

The total manufacturing cost assigned to Job 400:-

Particulars	Amount
Direct Materials	320
Direct Labor	230
Manufacturing overhead ($8.62 * 33 hours)	284.46
Total Manufacturing cost	834.46

Requirement 3:-

Unit Product cost for Job 400 = Total manufacturing cost/No.of units

=$834.46/50 units

=16.689

=$16.69 per unit(Rounded)

Requirement 4:-

Markup percentage = 130%

Cost per unit = $16.69

Markup = $21.70 ($16.69 * 130%)

Selling Price to establish = $38.39(Rounded)