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 125,000 Machine-hours required to support estimated production 62,500 Fixed manufacturing overhead cost $ 350,000 Variable manufacturing overhead cost per direct labor-hour $ 3.80 Variable manufacturing overhead cost per machine-hour $ 7.60 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials $ 201 Direct labor cost $ 240 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?
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