Cull Corporation uses a job-order costing system with a single plantwide predete

Question

Cull Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $308,000, variable manufacturing overhead of $2.60 per machine-hour, and 44,000 machine-hours. The company has provided the following data concerning Job X455 which was recently completed:

If the company marks up its unit product costs by 20% then the selling price for a unit in Job X455 is closest to: (Round your intermediate calculations to 2 decimal places.)

Number of units in the job 20 Total machine-hours 80 Direct materials $ 970 Direct labor cost $ 1,940

Explanation / Answer

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $308,000 + ($2.60 per machine-hour ×44,000 machine-hours) = $308,000 + $114,400 = $422,400

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $422,400 ÷ 44,000 machine-hours = $9.60 per machine-hour

Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $9.60 per machine-hour × 80 machine-hours = $768

Total cost of Job X455 =  Direct materials + Direct labor cost +  Manufacturing overhead applied = $970 + $1940 + $768 = $3678

Unit product cost = Total cost of Job X455 / Number of units in the job =  $3678 / 20 = $183.9

Markup = 20% * 183.9 = $36.78

Selling price = Unit product cost + Markup =  $183.9 +  $36.78 = 220.68

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