Problem 2-16 Plantwide Predetermined Overhead Rates;Pr icing [LO2-1, LO2-2, L231

Question

Problem 2-16 Plantwide Predetermined Overhead Rates;Pr icing [LO2-1, LO2-2, L231 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 Pixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 145,000 72,500 $406,000 $ 4.40 $ 8.80 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 183 295 15

Explanation / Answer

Answer:1 a The estimated total overhead cost is computed as follows:

Y = $406,000 + ($4.40 per DLH)(145,000 DLHs)

=406000+638000

=1044000

Plantwide predetermined overhead rate=Total overhead cost/Total direct labor hours

=1044000/145000

=7.2 per DLH

b.

c. Selling price=Total manufacturing cost+Markup

=586+(200% of 586)

=1758

Answer:2

a. Plantwide overhead rate=Total overhead cost/Total machine hours

Total overhead cost=$406000+(8.8 per MH*72500)

= 1044000

=1044000/72500

=14.4 per MH

b.

c. Selling price=Total manufacturing cost+Markup

=550+(200% of 550)

=1650

Direct Materials 183 Direct Labor cost 295 Manufacturing cost 108 15DLH*$7.2 per DLH Total manufacturing cost 586

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