Question

8.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		145,000
Machine-hours required to support estimated production		72,500
Fixed manufacturing overhead cost	$	406,000
Variable manufacturing overhead cost per direct labor-hour	$	4.40
Variable manufacturing overhead cost per machine-hour	$	8.80

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

Direct materials	$	183
Direct labor cost	$	295
Direct labor-hours		15
Machine-hours		5

Required:

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.)

Answer 1

• Requirement 2: based on machine hours

[a]

			Molding Department:
A	Variable Overhead rate		$                              8.80
B	Total machine hours		72,500
C = A x B	Total Variable Overhead		$                       638,000
D	Total Fixed Overheads		$                       406,000
E = C+D	Total manufacturing Overhead	$            1,046,400
F	Total machine hours	72,500
G = E/F	Plant Wide Overhead rate	$                    14.43 [Answer]

[b]

	Job 550
Direct material cost	$                               183
Direct Labor cost	$                               295
Manufacturing Overhead [5 machine hours x $ 14.43]	$                                  72
Total manufacturing cost assigned	$                               550 [Answer]

[c]

		Job 550
A	Total manufacturing cost assigned	$                               550
B = A x 200%	Selling Price	$                            1,100 [Answer]