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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 120,000 Machine-hours required to support estimated production 60,000 Fixed manufacturing overhead cost $ 336,000 Variable manufacturing overhead cost per direct labor-hour $ 3.60 Variable manufacturing overhead cost per machine-hour $ 7.20 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials $ 206 Direct labor cost $ 238 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?

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Expert Solution

Labour hours as base:
1. Pre-determined OH rate:
Variable manufacturing OH per DLH 3.6
Fixed Manufacturing OH per DLH
Total fixed OH 336000
Divide: Total DLH 120000 2.8
Oh rate per DLH 6.4
Manufacturing cost of Job 550:
Material 206
labour 238
Manufacturing OH (15 DLH @ 6.40) 96
Total Manufacturing Cost of Job 550. 540
Selling price of Job 550.
Total Mannufacturing cost 540
Add: Markup (540*200%) 1080
Selling price of Job 550. 1620
Machine Hours as Base
1. Pre-determined OH rate:
Vvariable Manufacturing OH per MH 7.2
Fixed Manufacturing OH per MH
Total fixed OH 336000
Divide: Total MH 60000 5.6
OH rate per MH 12.8
Manufacturing cost of Job 550:
Material 206
labour 238
Manufacturing OH (5 MH @ 12.80) 64
Total Manufacturing Cost of Job 550. 508
Selling price of Job 550.
Total Mannufacturing cost 508
Add: Markup (508*200%) 1016
Selling price of Job 550. 1524

ekkarill92 answered 1 year ago
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