Question

Landen corporation uses a job order costing system. At the beginning of the year, the company made the following estimates.

Direct labor hours to support est production 145,000

Machine hours required to support estimated production 72,500

Fixed manf overhead cost 406,000

Var manufacturing overhead cost per direct labor hour 4.40

Variable Manuf overhead cost her machine hour 8.80

During the year, job 550 was started and completed. The following information is availabe with respect to this job.

Direct Materisla $183

Direct labor cots $295

Direct labor hours 15

Machine hours 5

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 oerhead rate.

B. Compute the total manufacturing cost of job 550

If landed 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 ab etter allocation base than direct labor hours.

A. Compute the plantwide predetermined overhead rate.

B. Compute the total manufactuirng cost of job 550

C. If Landed uses a markup percentage of 200% of its total manufacturing cost, what seeling price would it establish for jo 550?

If you could please show as much calculations as possible, so I can learn this. Thank you!

Gina

Answer 1

1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor hours as the allocation base.Under this approach.

a) Plantwide overhead rate = 406000/145000+4.40 = 7.20 per labour hour

b) Total manufacturing cost = 183+295+(15*7.2) = $586

c) Selling price of job = 586*300% = $1758

2. Assume that Landen's controller believes that machine hours is ab etter allocation base than direct labor hours.

a) Plantwide overhead rate = 406000/72500+8.8 = 14.40 per machine hour

b) Total manufacturing cost = 183+295+(14.4*5) = $550

c) Selling price = 550*3 = $1650