Reference no: EM133006541

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 70,000
Machine-hours required to support estimated production 35,000
Fixed manufacturing overhead cost $ 210,000
Variable manufacturing overhead cost per direct labor-hour $ 1.40
Variable manufacturing overhead cost per machine-hour $ 2.80

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

Direct materials $ 215
Direct labor cost $ 231
Direct labor-hours 15
Machine-hours 5

Required:

Problem 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?

Problem 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?