Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-

Question

Problem 2-16 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:

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

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.)

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

Explanation / Answer

1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:

a) Predetermine overhead rate = (784000/140000)+2 = 7.60 per labour hour

b) Total manufacturing cost of job 550

c) Selling price = 514+(514*200%) = $1542

2. Assume that Landen has used machine hour

a) Predetermine overhead rate = (784000/70000)+4 = 15.20 per machine hour

b) Total manufacturing cost of job 550

c) Selling price = 476+(476*200%) = $1428

Direct material 175 Direct labour 225 Manufacturing overhead applied (15*7.6) 114 Total manufacturing cost of job 550 514

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.