Problem 3-18 (Algo) Plantwide Predetermined Overhead Rates; Pricing [LO3-1, LO3-2, LO3-3]

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 production	155,000
Machine-hours required to support estimated production	77,500
Fixed manufacturing overhead cost	$ 465,000
Variable manufacturing overhead cost per direct labor-hour	$ 4.80
Variable manufacturing overhead cost per machine-hour	$ 9.60

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

Direct materials	$ 210
Direct labor cost	$ 349
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:
   1. Compute the plantwide predetermined overhead rate.
   2. Compute the total manufacturing cost of Job 550.
   3. 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:
   1. Compute the plantwide predetermined overhead rate.
   2. Compute the total manufacturing cost of Job 550.
   3. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

Note: 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.

X Answer is complete but not entirely correct. 1. Direct labor-hours: 1a. Predetermined overhead rate 8.00 X per DLH 1b. Total manufacturing cost of Job 550 679 X 1c. Selling price 2.037 2. Machine-hours: 2a. Predetermined overhead rate 18.00 per MH 2b. Total manufacturing cost of Job 550 649 X 2c. Selling price 1,947 X