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?

 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