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		100,000
Fixed manufacturing overhead cost	$	650,000
Variable manufacturing overhead cost per machine-hour	$	3.00

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	$	450
Direct labor cost	$	210
Machine-hours used		40

Compute the total manufacturing cost assigned to Job 400.

3. If Job 400 includes 52 units, what is the unit product cost for this job?

4. If Moody uses a markup percentage of 120% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Answer 1

Answer 1.

Plant wide predetermined overhead rate = [ Estimated manufacturing overhead cost / Estimated machine hours ]

Plant wide predetermined overhead rate = [ $650,000 / 100,000 machine hours ] + $3 = $9.5

Answer 2.

Calculation of total manufacturing cost of Job 400 :

Direct materials	$450
(+) Direct labor	$210
(+) Manufacturing overhead [ Machine hours used * Plantwide predetermined overhead rate = 40 * 9.5 ]	$380
Total manufacturing cost	$1040

Answer 3.

Unit product cost for Job 400 = Total manufacturing cost / Units produced = $1040 / 52  = $20

Answer 4.

Selling price per unit for Job 400 = Manufacturing cost per unit + Markup = $20 + ( 20 * 120% ) = $44