Question

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.)

Answer 1

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