Bayou Machinery Works budgets to spend a total of $1,200,000 on manufacturing overhead during the coming year. Of this amount, Bayou expects fixed overhead to be $500,000. Bayou applies overhead to jobs based on machine hours and expects to generate business for 10,000 machine hours in the coming year.

Required:

a. Calculate Bayou’s predetermined variable, fixed, and total overhead rates for the coming year.

b. One of the jobs accepted for the coming year requires $5,000 in materials, $8,000 in direct labor, and 40 machine hours. Bayou charges its customers a 25% markup on product cost (also known as inventoriable cost). What price will Bayou charge the customer for this job?