Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

	Molding			Fabrication			Total
Estimated total machine-hours used		2,500			1,500			4,000
Estimated total fixed manufacturing overhead	$	13,750		$	17,250		$	31,000
Estimated variable manufacturing overhead per machine-hour	$	2.90		$	3.70

	Job P			Job Q
Direct materials	$	28,000		$	15,500
Direct labor cost	$	33,000		$	13,500
Actual machine-hours used:
Molding		3,200			2,300
Fabrication		2,100			2,400
Total		5,300			4,700

Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.

Required:

For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

7. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?

Answer 1

Calculating Predetermined overhead rate :

Estimated variable manufacturing overhead for Moulding department is (2.90 x 2,500 hrs)	$7,250
Estimated Variable manufacturing overhead for fabrication department is ( 3.70 x 1,500 hrs)	$5,550
Total fixed manufacturing overhead	31,000
Total	43,800

  

Predetermined Overhead Rate = $43,800/ 4,000 = 10.95 per hour

Particulars	Job P	Job Q
Direct Material	28,000	$15,500
Direct labor cost	33,000	$13,500
Overhead
Job P ($ 10.95 X 5,300	58,035	0
Job Q ($ 10.95 X 4,700	0	51,465
Total Cost (Manufacturing)	119,035	80,465
Mark up 80 % of total cost	95,228	64,372
Total Price for the Job (A)	214,263	144,837
No of Units Produced (B)	20	30
Selling Price per unit (A/B)	10,713.15	4827.9