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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 110,000
Machine-hours required to support estimated production 55,000
Fixed manufacturing overhead cost $ 308,000
Variable manufacturing overhead cost per direct labor-hour $ 3.20
Variable manufacturing overhead cost per machine-hour $ 6.40

During the year, Job 550 was started and completed. The following information is available with respect to this job:

Direct materials $ 187
Direct labor cost $ 370
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.)

1. Direct labor-hours:
a. Predetermined overhead rate per DLH
b. Total manufacturing cost of Job 550
c. Selling price
2. Machine-hours:
a. Predetermined overhead rate per MH
b. Total manufacturing cost of Job 550
c. Selling price

Solutions

Expert Solution

1

Direct labor-hours:

a.

Predetermined overhead rate

$6.00

Per DLH

b.

Total manufacturing cost of Job 550

$647

c.

Selling price

$1941

2

Machine hours

a.

Predetermined overhead rate

$12.00

Per MH

b.

Total manufacturing cost of Job 550

$617

c.

Selling price

$1851

Part 1 A

Estimated fixed manufacturing overhead

$

308,000

Estimated variable manufacturing overhead(3.20 per DLH * 110,000 DLH)

352,000

Estimated total manufacturing overhead cost

$

660,000

Estimated total manufacturing overhead (a)

$

660,000

Estimated total direct labor-hours (b)

110,000

DLH

Predetermined overhead rate (a) / (b)

$

6.00

per DLH

Part 1 B

Job 550

Direct materials

$

187

Direct labor

370

Manufacturing overhead applied

($6.00 per DLH * 15 DLH)

90

Total manufacturing cost of Job 550

$

647

Part 1 C

Job 550

Total manufacturing cost

$

647

Markup (200%)

1294

Selling price

$

1941

Part 2 A

Estimated fixed manufacturing overhead

$

308,000

Estimated variable manufacturing overhead (6.40 per MH * 55,000 MHs)

352,000

Estimated total manufacturing overhead cost

$

660,000

Estimated total manufacturing overhead (a)

$

660,000

Estimated total machine-hours (b)

55,000

MHs

Predetermined overhead rate (a) / (b)

$

12.00

per MH

Part 2 B

Job 550

Direct materials

$

187

Direct labor

370

Manufacturing overhead applied

($12.00 per MH * 5 MH)

60

Total manufacturing cost of Job 550

$

617

Part 2 C

Job 550

Total manufacturing cost

$

617

Markup (200%)

1234

Selling price

$

1851

ekkarill92 answered 2 years ago
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