Question

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 135,000
Machine-hours required to support estimated production 67,500
Fixed manufacturing overhead cost $ 378,000
Variable manufacturing overhead cost per direct labor-hour $ 4.20
Variable manufacturing overhead cost per machine-hour $ 8.40

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

Direct materials $ 196
Direct labor cost $ 238
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.)

Homework Answers

Answer #1
1. Direct labor hours
a
Predetermined overhead rate 7.00 per DLH =4.20+(378000/135000)
b
Direct materials 196
Direct labor cost 238
Overhead applied 105 =15*7
Total manufacturing cost of Job 550 539
c
Total manufacturing cost 539
Add: Markup @ 200% 1078
Selling price 1617
2. Machine hours
a
Predetermined overhead rate 14.00 per MH =8.40+(378000/67500)
b
Direct materials 196
Direct labor cost 238
Overhead applied 70 =5*14
Total manufacturing cost of Job 550 504
c
Total manufacturing cost 504
Add: Markup @ 200% 1008
Selling price 1512
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