Question

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

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