Problem 2-16 (Algo) Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3]

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 production160,000

Machine-hours required to support estimated production80,000

Fixed manufacturing overhead cost$480,000

Variable manufacturing overhead cost per direct labor-hour$5.00

Variable manufacturing overhead cost per machine-hour$10.00

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

Direct materials

$240Direct labor cost$233

Direct labor-hours15

Machine-hours5

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. Direct Labor hour

A. predetermined overhead rate ------------ ---------Per DHL

B. Total manufacturing cost of job 550

c. Selling price

2. Machine hours

A. Predetermined over head rate ----------- ----------Per DHL

B. Total manufacturing cost of job 550

C. Selling price