Question

# TB Problem Qu. 2-272 Kluth Corporation has two manufacturing ... Kluth Corporation has two manufacturing departments--Molding...

TB Problem Qu. 2-272 Kluth Corporation has two manufacturing ...

Kluth Corporation has two manufacturing departments--Molding and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

 Molding Customizing Total Estimated total machine-hours (MHs) 7,000 3,800 10,800 Estimated total fixed manufacturing overhead cost \$ 18,200 \$ 7,600 \$ 25,800 Estimated variable manufacturing overhead cost per MH \$ 1.50 \$ 5.00

During the most recent month, the company started and completed two jobs--Job C and Job M. There were no beginning inventories. Data concerning those two jobs follow:

 Job C Job M Direct materials \$ 16,900 \$ 10,300 Direct labor cost \$ 23,600 \$ 10,600 Molding machine-hours 1,250 5,750 Customizing machine-hours 3,300 500

Required:

Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling prices for Job C and for Job M. (Do not round intermediate calculations.)

Customizing department overhead rate = (7,600 / 3,800) + 5 = \$ 7 per machine hour

Molding department overhead rate = (18,200 / 7,000) + 1.50 = \$ 4.10 per machine hour

Calculate selling price

 Job C Job M Direct material 16,900 10,300 Direct labour 23,600 10,600 Overhead applied: Molding Department 1,250*4.1 = 5,125 5,750*4.1 = 23,575 Customizing Department 3,300*7 = 23,100 500*7 = 3,500 Total manufacturing cost 68,725 47,975 Mark up @20% 13,745 9,595 Selling Price 82,470 57,570