Question

Collini Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system...

Collini Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

Machining Customizing
Machine-hours 17,000 15,000
Direct labor-hours 3,000 6,000
Total fixed manufacturing overhead cost $ 102,000 $ 61,200
Variable manufacturing overhead per machine-hour $ 1.70
Variable manufacturing overhead per direct labor-hour $ 4.10

During the current month the company started and finished Job T268. The following data were recorded for this job:

Job T268: Machining Customizing
Machine-hours 80 30
Direct labor-hours 30 50
Direct materials $ 720 $ 380
Direct labor cost $ 900 $ 1,500

If the company marks up its manufacturing costs by 40% then the selling price for Job T268 would be closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

$6,763.40

$7,440.00

$4,831.00

$1,932.40

Homework Answers

Answer #1

Predetermine overhead rate of machining = (102000/17000)+1.70 = 7.7 per machine hour

Predetermine overhead rate of fabrication = (61200/6000)+4.10 = 14.30 per labour hour

Calculate selling price :

Direct material (720+380) 1100
Direct labour (900+1500) 2400
Machining department overhead (7.7*80) 616
Fabrication department overhead (50*14.3) 715
Total manufactuirng cost 4831
Markup 40% 1932.40
Selling price 6763.40

So answer is a) $6763.40

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