cost summary for job 408	milling	assembly
Machine-hours	50	2
Direct labor-hours	8	40
Direct materials cost	520	210
Direct labor cost	136	800

2. Change the total fixed manufacturing overhead cost for the Milling Department in Data area back to $390,000, keeping all of the other data the same as in the original example. Consider a new job, Job 408, with the following characteristics:

n your worksheet, enter this new data in the cells for Job 407.

What is the new selling price for Job 408?

3. Without changing the data for the job from requirement 2 above, what is the selling price for Job 408 if the total number of machine-hours in the Assembly Department increases from 3,000 machine-hours to 5,000 machine-hours?

4. Restore the total number of machine-hours in the Assembly Department to 3,000 machine-hours. And keep the job data the same as it was in Requirement 2. What is the selling price for Job 408 if the total number of direct labor-hours in the Assembly Department decreases from 80,000 direct labor-hours to 40,000 direct labor-hours?

EXHIBIT 2-5 Dickson Company: An Example Using Multiple Predetermined Overhead Rates

Step 1: Calculate the estimated total manufacturing overhead cost for each department.

Milling Department Overhead Cost (Y)= $390,000 + ($2.00 per MH 60,000 MHs) = $390,000 + $120,000 = $510,000

Assembly Department Overhead Cost (Y) = $500,000 + ($3.75 per DLH 80,000 DLHs) = $500,000 + $300,000 = $800,000

Step 2: Calculate the predetermined overhead rate in each department.

Milling Department Overhead Rate = $510,000/60,000 machine-hours = $8.50 per machine-hour

Assembly Department Overhead Rate = $800,000/80,000 direct labor-hours = $10.00 per direct labor-hour

Step 3: Calculate the amount of overhead applied from both departments to Job 407.

Milling Department: Overhead Applied to Job 407 = $8.50 per MH 90 MHs = $765

Assembly Department: Overhead Applied to Job 407 = $10.00 per DLH 20 DLHs = $200

Step 4: Calculate the total job cost for Job 407.

	Milling	Assembly	Total
Direct materials	$ 800	$ 370	$ 1,170
Direct labor	$ 70	$ 280	350
Manufacturing overhead applied	$ 765	$ 200	965
Total cost of Job 407			$ 2,485

Step 5: Calculate the selling price for Job 407.

Total cost of Job 407	$ 2,485.00
Markup ($2,485 75%)	1,863.75
Selling price of Job 407	$ 4,348.75