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 Direct labor-hours required to support estimated production Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 80,000 40,000 $240,000 $ 1.80 $ 3.60 During the year, Job 550 was started and completed. The following information is available with respect to this job Direct materials Direct labor cost Direct labor-hours Machine-hours $ 207 $257 15 Required 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 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? 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? Round your intermediate calculations to 2 decimal places. Round your "Predetermined Overhead Rate" answers to 2 decimal places and all other answers to the nearest whole dollar.) 1. Direct labor-hours a. Predetermined overhead rate b. Total manufacturing cost of Job 550 C. Selling price 2.Machine-hours a. Predetermined overhead rate b. Total manufacturing cost of Job 550 c. Selling price per DLH per MH

Explanation / Answer

Part 1 A

Estimated fixed manufacturing overhead..................$240,000

Estimated variable manufacturing overhead:$1.80 per DLH × 80000 DLH..........……….................................................144,000

Estimated total manufacturing overhead cost... $384000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead (a)......$384000

Estimated total direct labor-hours (b)..............80,000DLH

Predetermined overhead rate (a) ÷ (b)............. $4.80 per DLH

Part 1 B

Total manufacturing cost assigned to Job 550:

Direct materials.......................... ........ .............. ...... ...... $207

Direct labor........... ............ ....................................................257

Manufacturing overhead applied($4.80 per DLH × 15 DLH)...72

Total manufacturing cost of Job 550....................... ...... ..$536

Part 1 C

The selling price for Job 550 is computed as follows:

Job 550

Total manufacturing cost.............. ........ $ 536

Markup (200%)............................. ...........1,072

Selling price...….............................. ...... $1,608

Part 2 A

Estimated fixed manufacturing overhead............... $240000

Estimated variable manufacturing overhead:$3.60 per MH × 40,000 MHs...............................................................1440,000

Estimated total manufacturing overhead cost.... $384,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead (a)..... $384,000

Estimated total machine-hours (b).......................40,000 MHsPredetermined overhead rate (a) ÷ (b).........$9.60per MH

Part 2 B

Total manufacturing cost assigned to Job 550:

Direct materials................................................................. ... $207

Direct labor.............. ...... ...... ........................... .. .............. ..257

Manufacturing overhead applied($9.60 per MH × 5 MH)... .48

Total manufacturing cost of Job 550............………….. .... $512

Part 2 c

The selling price for Job 550 is computed as follows:

Job 550

Total manufacturing cost.......... $ 512

Markup (200%).............................. 1024

Selling price...................................$1536

Therefore

1. Direct - labor hours A predetermined overhead rate 4.60 Per DLH B total manufacturing cost for job 550 536 C selling price 1608 2 machine hours: A predetermined overhead rate 9.60 Per MH B total manufacturing cost for job 550 512 C selling price 1536

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