Landen Corporation uses a job-order costing system. At the beginning of the year

Question

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

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

Required:

2. Assume that Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

Direct labor-hours required to support estimated production 145,000 Machine-hours required to support estimated production 72,500 Fixed manufacturing overhead cost $ 406,000 Variable manufacturing overhead cost per direct labor-hour $ 4.40 Variable manufacturing overhead cost per machine-hour $ 8.80

Explanation / Answer

a) Plantwide predetermine overhead rate = 406000/72500+8.80 = 14.40 per machine hour

b) Calculate total manufacturing cost of job 550

c) Selling price = 550+(550*200%) = 1650

Direct material 183 Direct labour 295 Applied overhead (14.40*5) 72 Total manufacturing cost 550

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