Julius Manufacturing prices its products at full cost plus 30 percent. The compa
ID: 2561192 • Letter: J
Question
Julius Manufacturing prices its products at full cost plus 30 percent. The company operates two support departments and two producing departments. Budgeted costs and normal activity levels are as follows: Support Departments Producing Departments A B C D Overhead costs $40,000 $100,000 $180,000 $240,000 Square feet 1,000 1,200 2,000 6,000 Number of employees 20 30 60 40 Direct labor hours - - 10,000 6,400 Machine hours - - 6,000 10,800 Support Department A's costs are allocated based on square feet, and Support Department B's costs are allocated based on number of employees. Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours. One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for the product cost $180 per unit, and direct labor is $80 per unit. If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be : Show all work.
Explanation / Answer
answer is $468
Predetermined overhead rate = total estimated overhead costs/ total estimated direct labor hours
overhead cost
Dept A - (40000*2000/8000) 10000
Dept B - (100000*60/100) 60000
Dept C - 180000
total overhead costs 250000
estimated direct labor hours = 10000
therefore, predetermined overhead cost = 250000/10000 = 25
selling price
direct materials - 180
direct labor - 80
overhead - 100 (25*4)
cost per unit - 360
selling price = 360*(1+30%) = 468
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