Reference no: EM132680380
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 150,000
Machine-hours required to support estimated production 75,000
Fixed manufacturing overhead cost$420,000
Variable manufacturing overhead cost per direct labor-hour$4.60
Variable manufacturing overhead cost per machine-hour$9.20
During the year, Job 550 was started and completed. The following information is available with respect to this job:
Direct materials $195
Direct labor cost $288
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?