Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures spec
ID: 2419083 • Letter: F
Question
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $349,800 of manufacturing overhead for an estimated allocation base of 1,060 direct labor-hours. The following transactions took place during the year (all purchases and services were acquired on account):
The balances in the inventory accounts at the beginning of the year were:
260,000
Job 412 was one of the many jobs started and completed during the year. The job required $8,600 in direct materials and 40 hours of direct labor time at a total direct labor cost of $9,500. If the job contained five units and the company billed at 65% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
The balances in the inventory accounts at the beginning of the year were:
260,000
Indirect labor $ 96,000 Selling and administrative salaries $ 140,000Explanation / Answer
Cost Sheet of Job 412:
1. Direct Materials: $ 8,600
2. Direct Labour: $ 9,500
Total Cost of Job: $ 18,100
The Job contains five (5) units i.e Cost of one Unit: $ 18100/5 = $ 3,620
Company billed at 65% above the production cost to the customer.
Therefore, The price charged to customer : $ 3620 * 165% = $ 5,973.
The Price charged to customer = $ 5,973.
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