Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing[LO2-1, LO2-2, LO2-3]
Landen Corporation uses a job-order costing system. At thebeginning of the year, the company made the followingestimates:
| | |
| Direct labor-hours required to support estimatedproduction | | 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. Thefollowing 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 plantwidepredetermined overhead rate with direct labor-hours as theallocation 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 totalmanufacturing cost, what selling price would it establish for Job550?
2. Assume that Landen’s controller believes that machine-hoursis a better allocation base than direct labor-hours. Under thisapproach:
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 totalmanufacturing cost, what selling price would it establish for Job550?
(Round your intermediate calculations to 2 decimalplaces. Round your "Predetermined Overhead Rate" answers to 2decimal places and all other answers to the nearest wholedollar.)
