Question

Maria Company uses a job order costing system with a plantwide overhead rate on machine-hours. At the beginning of the year, the company made the following estimates:

Machine Hours estimated to support estimated production	210,000
Fixed manufacturing overhead cost	$3,360,000.00
Variable manufacturing overhead cost per machine-hour	$              2.00

During the year, Job P90 was started, completed, and sold to the customer. The following information was available with respect to this job.

Direct materials	$1,564.00
Direct labor cost	$1,122.00
Machine-hours used	81

Required:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing overhead assigned to Job P90.

c. Compute the unit product cost of Job P90.

d. If the company uses a markup of 50%, compute the selling price for Job P90.

Answer 1

a. Plantwide predetermined overhead rate = Fixed manufacturing overhead cost / Machine Hours estimated

= $3,360,000 / 210,000

= $16 per machine hour

b. Total manufacturing overhead assigned to Job P90 = (Variable overhead rate per hour + Fixed overhead rate per hour)*Machine-hours used

= (2+16)*81

= $1,459

c. Unit product cost of Job P90 = Direct material + Direct labor + Total manufacturing overhead cost

=1564+1122+1459

= $4,145

d. Selling price for Job P90 = Unit product cost of Job P90 + Unit product cost of Job P90 *50%

= $4,145 + $4,145*50%

= $6217.50