Item4 2 points Time Remaining 43 minutes 24 seconds 00:43:24 Item 4 Item 4 2 poi
ID: 2332029 • Letter: I
Question
Item4 2 points Time Remaining 43 minutes 24 seconds 00:43:24 Item 4 Item 4 2 points Time Remaining 43 minutes 24 seconds 00:43:24 TB MC Qu. 2-191 Comans Corporation has two ... Comans Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Milling Customizing Machine-hours 26,000 28,000 Direct labor-hours 13,000 8,000 Total fixed manufacturing overhead cost $ 153,400 $ 30,400 Variable manufacturing overhead per machine-hour $ 1.40 Variable manufacturing overhead per direct labor-hour $ 3.00 During the current month the company started and finished Job A319. The following data were recorded for this job: Job A319: Milling Customizing Machine-hours 30 20 Direct labor-hours 50 40 Direct materials $ 700 $ 170 Direct labor cost $ 720 $ 510 If the company marks up its manufacturing costs by 10% then the selling price for Job A319 would be closest to: ( $3,135 $2,850 $2,591 $259
Explanation / Answer
Calcultion of selling price
Note - Overhead rate for variable cost is given for both the departments. Hence we have to calculate Fixed overhead rate to allocate to job A319.According to q, overhead rate for milling dept will be based on Machine houre and of customizing dept will be based on direct labours.
Rate for Milling Dept = Total fixed OH / Machine hours = 153000/26000 = 5.9 per Machine hour
Rate for customizing dept = Total fixed OH / labour hours = 30400/8000 = 3.8 per labour hour
Fixed Cost allocated to Job A319
- Milling dept = 30 M. hours * 5.9 = 177
- customizing dept = 40 Labour hours * 3.8 = 152
Hence Selling price would be closest to 2850.
Particulars Amount Direct material - Milling 700 - customizing 170 Direct Labour - Milling 720 - customizing 510 Variable Mfg overhead - Milling ( Based on Machine hours) (30 hrs * 1.40) 42 - customizing ( Based on labour hours) (40*3) 120 Fixed overhead - Milling (See note) 177 - customizing 152 Total Cost 2591 Add : margin @ 10% (2591*10/100) 259.1 Selling price 2850.1Related Questions
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