Question
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
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 | 140,000 | |
Machine-hours required to support estimated production | 70,000 | |
Fixed manufacturing overhead cost | $ | 784,000 |
Variable manufacturing overhead cost per direct labor-hour | $ | 2.00 |
Variable manufacturing overhead cost per machine-hour | $ | 4.00 |
During the year, Job 550 was started and completed. The following information is available with respect to this job:
Direct materials | $ | 175 |
Direct labor cost | $ | 225 |
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 Landens 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.)
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