Landen Corporation uses a job-order costing system. At the beginning of the year
ID: 2401234 • Letter: L
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 production Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour 125,000 62,500 $350,000 $3.80 $7.60 During the year, Job 550 was started and completed. The following information is available with respect to this job Direct materials Direct labor cost Direct labor-hours Machine-hours $ 201 240 15 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.)Explanation / Answer
1a) Predetermine overhead rate = (350000/125000)+3.80 = 6.6 per DLH
1b) Total manufacturing cost of job 550 = 201+240+(6.6*15) = $540
1c) Selling price of job = 540*300% = $1620
2a) Predetermine overhead rate = (350000/62500)+7.60 = 13.2 per MH
Total manufacturing cost of job = 201+240+(5*13.2) = $507
Selling price = 507*300% = $1521
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