Question

Miguel Manufacturing Company uses a predetermined manufacturing overhead rate based on direct labor hours. At the beginning of 2018, they estimated total manufacturing overhead costs at $2,352,000, and they estimated total direct labor hours at 7,000. The administration and selling overheads are to be absorbed in each job cost at 15% of prime cost. Distribution cost should be added to each job according to quotes from outside carriage companies. The company wishes to quote for job # 401. Job stats are as follows: Direct materials cost $173,250 Direct labour cost $240,000 Direct labour hours 500 hours Special Design Cost $8,750 Distribution quote from haulage company $21,700 Units of product produced 400 cartons a) Compute Miguel’s Manufacturing Company predetermined manufacturing overhead rate for 2018. b) How much manufacturing overhead was allocated to Job #401? c) Calculate the total cost & quotation price of Job #401, given that a margin of 25% is applied. d) How much was the production cost per unit (cost per carton) of finished product?

Answer 1

	A	B	C
1	a) Compute Miguel’s Manufacturing Company predetermined manufacturing overhead rate for 2018.
2
3
4	estimated total manufacturing overhead costs	2352000
5	estimated total direct labor hours	7000
6	predetermined manufacturing overhead rate for 2018	336	per direct labor hour
7
8	b) How much manufacturing overhead was allocated to Job #401?
9
10	predetermined manufacturing overhead rate for 2018	336	per direct labor hour
11	direct labor hour used for job #401	500
12	manufacturing overhead was allocated to Job #401	168000
13
14	c) Calculate the total cost & quotation price of Job #401, given that a margin of 25% is applied.
15
16
17	Direct materials cost	173250
18	Direct labour cost	240000
19	Prime cost	413250
20	manufacturing overhead allocated	168000
21	Total manufacturing cost	581250
22	administration and selling overheads	61988
23	Distribution quote from haulage company	21700
24	Total cost	664938
25	Margin	166234
26	quotation price of Job #401	831172
27
28	d) How much was the production cost per unit (cost per carton) of finished product?
29
30	Total cost	664938
31	Number of units	4000
32	Production cost per unit	166.23

Above figures have been calculated in the following manner:

a) Compute Miguel’s Manufacturing Company predetermined manufacturing overhead rate for 2018.
estimated total manufacturing overhead costs	2352000
estimated total direct labor hours	7000
predetermined manufacturing overhead rate for 2018	=B4/B5	per direct labor hour
b) How much manufacturing overhead was allocated to Job #401?
predetermined manufacturing overhead rate for 2018	336	per direct labor hour
direct labor hour used for job #401	500
manufacturing overhead was allocated to Job #401	=B10*B11
c) Calculate the total cost & quotation price of Job #401, given that a margin of 25% is applied.
Direct materials cost	173250
Direct labour cost	240000
Prime cost	=B17+B18
manufacturing overhead allocated	168000
Total manufacturing cost	=B19+B20
administration and selling overheads	=B19*0.15
Distribution quote from haulage company	21700
Total cost	=B21+B22+B23
Margin	=B24*0.25
quotation price of Job #401	=B24+B25
d) How much was the production cost per unit (cost per carton) of finished product?
Total cost	664938
Number of units	4000
Production cost per unit	=B30/B31