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

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		110,000
Machine-hours required to support estimated production		55,000
Fixed manufacturing overhead cost	$	308,000
Variable manufacturing overhead cost per direct labor-hour	$	3.20
Variable manufacturing overhead cost per machine-hour	$	6.40

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

Direct materials	$	187
Direct labor cost	$	370
Direct labor-hours		15
Machine-hours		5

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.

a. 

The estimated total overhead cost is computed as follows:

Y = $308,000 + ($3.20 per DLH)(110,000 DLHs)

Estimated fixed manufacturing overhead	$	308,000
Estimated variable manufacturing overhead: $3.20 per DLH × 110,000 DLH		352,000
Estimated total manufacturing overhead cost	$	660,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead (a)	$	660,000
Estimated total direct labor-hours (b)		110,000	DLH
Predetermined overhead rate (a) ÷ (b)	$	6.00	per DLH

b.

Total manufacturing cost assigned to Job 550:

Direct materials	$	187
Direct labor		370
Manufacturing overhead applied ($6.00 per DLH × 15 DLH)		90
Total manufacturing cost of Job 550	$	647

c.

The selling price for Job 550 is computed as follows:

	Job 550
Total manufacturing cost	$	647
Markup (200%)		1,294
Selling price	$	1,941

2.

a.

The estimated total overhead cost is computed as follows:

Y = $308,000 + ($6.40 per MH)(55,000 MHs)

Estimated fixed manufacturing overhead	$	308,000
Estimated variable manufacturing overhead: $6.40 per MH × 55,000 MHs		352,000
Estimated total manufacturing overhead cost	$	660,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead (a)	$	660,000
Estimated total machine-hours (b)		55,000	MHs
Predetermined overhead rate (a) ÷ (b)	$	12.00	per MH

b.

Total manufacturing cost assigned to Job 550:

Direct materials	$	187
Direct labor		370
Manufacturing overhead applied ($12.00 per MH × 5 MH)		60
Total manufacturing cost of Job 550	$	617

2.

c.

The selling price for Job 550 is computed as follows:

	Job 550
Total manufacturing cost	$	617
Markup (200%)		1,234
Selling price	$	1,851